Annotation on practical implementation by Kai-Friedrich Niermann, Attorney, Paderborn [Germany]
Let‘s say the potential coalition partners of CDU, FDP and the Green Party (so called Jamaica Coalition) part this evening and determine the uptake of coalition negotiations. And let us furthermore assume The Green Party with tie-in of FDP achieve Cannabis liberalisation in full as well as pushing through their Cannabis Control Act in the negotiations going on from mid December until shortly before Christmas. And also let’s assume the Cannabis Incorporate Act is then voted in by Bundestag in May or June ; then Germany will be faced with even more massive changes and the latter in various sectors.
The Cannabis Law includes the option of applications for cultivation licences (farming), wholesale trade licences as well as retail licences such as specialist shops. In addition to this import and export licences can be applied for. Expert prior knowledge is not required and simply personal trustworthiness as demanded within public-houses law is stipulated. Business owners must not have previous convictions.
Assuming a conservative estimate of 10 t of Cannabis per week being consumed in Germany this results in an annual demand of 520 t. The production of Cannabis is deemed to result in a harvest of 440 g per m² within a harvest cycle of 52 days which allows for 7 harvests per year. To cover 107% consumption of Germany an acreage of 180.000 m² would be prerequisite.
Breaking down and allocating these figures to an average municipality such as Paderborn with a population of 140.000 this would result in a required cultivation acreage of 307 m².
With the scheduled Cannabis Control Act tax of 4€/g provided by statute, 1€/g for production costs, 2€/g for wholesale trade and also 3 €/g for specialist shops this results in a price of 10€ in total per gram which is equivalent to the current black market price. It will be a balancing act not to drive the price to high to enable draining the black market effectively as intended.
For Paderborn alone and at this retail price it would amount to a turnover for cultivation/farming of approx. 890.000 €, 1,8 million € for the wholesale trade and 2,6 million € for specialist shops.
However the Cannabis Control Act provides for numerous regulations as to Quality Assurance, protection of production lines, safeguarding of youth protection and prevention. Consequently production facilities must be secured with fences and alarm systems. Transport of Cannabis is governed by specified security restrictions, the specialist shops must train their personnel and deliver proof for consistent follow-up trainings as well as a substantial social concept. Also packaging has to be secured to a high extent and must feature comprehensive warning and reconnaissance information.
It remains doubtful that the current illegal Cannabis producers will meet these requirements in full and step out from illegality. For this reason it is to be expected that capital investors who with their capacity are able to administer the task more economically will edge into the market.
Then within the 2nd half of 2018 the race for the desired licences for farming, wholesale trade, import, export and specialist retailers would begin.
Restrictions as to numbers of licence permits are not scheduled within Cannabis Control Act so any desired number of farming facilities or specialist retailers could operate. Indeed we may assume that the Authorities will initially be totally snowed under and will authorise thoroughly drawn up applications at first which are based on convincing technical programmes and a business plans.
Any potentially interested party striving to be a player in this new and strictly regulated market is to focus on the new situation just in time and develop technical and operational concepts, investment concepts as well as calculations of overall return on investment as well as liquidity calculations. And just in time could „slip into gear“ as from tomorrow morning!
RA Kai-Friedrich Niermann