$5-million loan; plant never used

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This article was published 17/12/2012 (4764 days ago), so information in it may no longer be current.

Less than a year after the Canada Economic Action Plan made a $5-million loan to an upstart hemp-processing company, the operation seems to have gone up in smoke.

Farm Genesis in Waskada, which promised to make everything from hemp granola bars to hemp milk to hemp protein gel caps, ceased operations within about nine months of receiving the $5 million. The speed at which the company failed calls into question what due diligence Ottawa performed before doling out public money.

Public funds were used to build a huge, 25,000-square-foot plant that stands empty and has never been used. Farm Genesis staff were laid off, the office has been locked for more than a year, and no one answers its phone.

The building is up for sale but it’s expected to be a tough sell: a mammoth structure in a town of 200 people, in sparsely populated southwestern Manitoba.

The Farm Genesis investment was part of a flurry of federal spending across the country two years ago under the Canada Economic Action Plan.

Both the owners and the Harper government say little about it. The federal Western Economic Diversification Canada office cites a confidentiality agreement with the company, even though the project was mostly funded with taxpayer dollars.

A spokesman for Western Diversification conceded “this project was not successful.” The office said action is being taken to recover funds but would not say what action or what funds it may recover.

The concept of Farm Genesis is not without merit. The hemp-processing industry has exploded across the globe. Canada is the world leader in hemp products, and Manitoba is leading Canada. Hemp Oil Canada Inc. in Ste. Agathe and Manitoba Harvest Hemp Foods and Oils in Winnipeg are among the province’s fastest-growing companies.

And government does try to help depressed regions. The Waskada area is not exactly depressed — it’s bubbling with oil money and has some of the largest farms on the Prairies — but few people live there. Some jobs, other than oil jobs, could help retain population.

That’s why 32 local people originally invested $5,000 each to form the company. Farm Genesis was seen as a place where family members might one day find employment. And most investors are farmers who could grow the hemp the company requires. Most of the investors are people who obtain revenue from oil extraction on their land.

But at the same time, the project always looked like a case of a Tory federal government rewarding a Tory riding. Save for one four-year term, federal Conservatives have held the Brandon-Souris riding for the past 60 years. And the grant annoyed companies already involved in hemp processing who had succeeded more or less on their own.

As well, the province chipped in only $75,000. Most Canada Economic Action Plan spending has provinces picking up a bigger share.

Colin Craig, prairie director of the Canadian Taxpayers Federation, called it “shocking” how quickly the company ceased operations after receiving federal funding. “That’s pretty impressive from an inefficiency perspective,” he said.

He also questioned who the confidentiality agreement cited by Western Diversification protects.

“We seem to be seeing this more and more: government hiding behind third-party clauses. It’s a load of baloney. We’re talking about public funds. The government should be up front and centre about that,” Craig said.

Hope is not entirely lost. Farm Genesis is not in bankruptcy. The word people in the area use to describe it is “dormant.” Company president Keith Hannah still goes into the office and said the company could still be turned around, just not on the scale envisioned.

“We built a building too big,” Hannah said.

bill.redekop@freepress.mb.ca