South Africa leaves R30 billion to go up in smoke
South Africa could have been the biggest player in the global cannabis industry – however, a lack of consolidated plans and enforcement to actualise this means the country’s R30 billion masterplan is being left to wither and die.
This is the view presented by the founder and CEO of integrated agricultural and pharmaceutical company Nexus Pharma, Johann Slabber, who is calling for better collaboration between the private and public sectors to get South Africa’s commercial cannabis plans on track.
There have been many legislative developments for cannabis (dagga) in South Africa over recent years, however the regulation for recreational and medicinal cannabis use significantly differs.
In South Africa, private, small-scale recreational cannabis use among adults is permitted, while commercial use is restricted to medicinal and industrial applications under strict regulations.
Medicinal marijuana was legalised in 2017, with cultivation limited to licensed manufacturers by the South African Health Products Regulatory Authority (SAHPRA). It is strictly regulated, given that THC is a psychoactive compound.
In 2018, the Constitutional Court decriminalised private use, and in 2019, the Cabinet called for a national cannabis commercialisation strategy to boost the economy and create jobs.
The 2021 National Cannabis Master Plan projected significant economic benefits and job creation, including 130,000 jobs and access to a R30 billion market.
In May 2024, President Cyril Ramaphosa signed the Cannabis for Private Purposes Act, establishing a legal framework for private use and cultivation.
However, some say that there is still conflict as the restrictive commercial regulations do not align with the more permissive recreational use policies, leading to inconsistencies, regulatory challenges and hurdles to commercialisation.
“Is [the passing of the Cannabis for Private Purposes Act] good news for the agricultural industry? Not quite yet,” said legal experts at Cliffe Dekker Hofmeyr, Belinda Scriba, Clauida Grobler and Luke Kleinsmidt.
“The Act currently imposes significant restrictions on the legal cultivation and commercial trade of cannabis, mirroring trends observed in several other African countries.
“As the legislation and anticipated legislation currently stand, the cultivation of cannabis remains limited to farming for either medicinal use (licensed), or private use in small quantities without any economic gain for the cultivator,” added the legal experts.
Bottlenecks
“Starting any business in these tough economic times is challenging, but raising investor capital is especially difficult for industries with so much red tape and confusion surrounding it,” attorney and cannabis business consultant Danmari Duguid recently told BusinessTech.
“Medical cannabis operations face stringent regulations and high financial and infrastructural demands, while hemp cultivation offers simpler licensing and cheaper methods, [but stringent] restrictions on THC (the psychoactive component of the cannabis plant) levels pose difficulties for farmers,” who want to find themselves on the right side of the law, added the expert
Looking at medicinal cannabis, according to information on the SAHPRA website, over 110 cannabis cultivation licenses have been issued, with many waiting to be approved.
However, only a handful of these cultivation facilities are exporting on a bulk scale.
Ben Sassman from Hemp4Life spoke to the Portfolio Committee on Small Business Development earlier this year and said that while licences and permits are issued, most hopeful small businesses face an upward battle.
Such issues are pushing people to the illicit market.
“This is a massive problem we’re facing in South Africa,” said Slabber.
“Unfortunately, sites have invested millions in setting up the infrastructure [for commercial cannabis] and desperate for the return on investment. [Being inhibited has led to many] of them supplying to the illicit markets and now we’re sitting in a situation where there’s more product on the illicit markets through licenced producers than there were before the issuing of licences,” he added.
“The absence of a legislative framework for the recreational market further complicates matters, fostering varied interpretations of the 2018 Constitutional Court Judgement, which has yet to enable a formal recreational market,” and as a result, the black market has been “flourishing”, said Duguid.
Slabber said to address these challenges, the industry needs “immediate interventions” to:
- Enhance Regulatory Enforcement: Strengthen measures to crack down on unlicensed operators
and ensure compliance among licensed entities. - Facilitate Market Access: Streamline export processes and provide clear guidance to
growers, helping them navigate market challenges and reduce illegal practices.
He proposes creating a National Cannabis Compliance and Marketing Initiative, which would unite the private and public sector stakeholders to address industry challenges and bottlenecks.
“Perhaps we can take a lesson from Germany where well-designed regulations for recreational use
have been crucial in preventing misuse and ensuring equitable market access,” said Slabber.
“As South Africa develops regulations for this segment, it is vital to establish measures that prevent indiscriminate use while also supporting smaller farmers and businesses. This balanced approach will help address immediate local market needs and support long-term industry growth,” he added.
Government response
“We need to destigmatise the use of cannabis, whether it’s for recreational, medicinal or religious purposes – the Constitutional framework allows us as adults to use it without prosecution, ”said former chairperson of Parliament’s Portfolio Committee on Small Business Development, Faiez Jacobs.
He called for coherence in government to create an environment that ensures that small cannabis and hemp businesses are able to participate in the entire value chain.
Eastern Cape Premier Oscar Mabuyane recently echoed this, saying that “we are concerned by the slow progress of the country’s policymakers in expediting the full implementation… of an enabling cannabis regulation framework that encompasses the commercial exploitation of whole plant, all purposes legislation.”
Briefing the media on the progress of the government implementing the Cannabis Master Plan on 5 September 2024, Acting Minister in The Presidency, Maropene Ramokgopa, said that progress is being made.
Ramokgopa announced that the Department of Justice is drafting regulations for private cannabis use, while the Department of Health has completed consultations on amending the Medicines Act.
The Department of Trade, Industry and Competition has finished a value chain analysis and will soon begin consultations on the Cannabis Commercialisation Policy.
The Agricultural Research Council, with support from the Department of Agriculture, is developing hemp varieties and preparing for a second seed multiplication season for 2025.
The Minister of Agriculture approved a Hemp Certification Scheme in May 2024, and R124 million in research has been commissioned for various cannabis-related studies.
Additionally, 10 SMEs in Gauteng received support for product development, and ongoing consultations with provinces are taking place.
Additionally, she said that 1,110 permits have been issued for hemp cultivation since the declaration of hemp as an agricultural crop.
The Cliffe Dekker Hofmeyr legal experts say South Africa’s advancements in hemp legislation may set a precedent for broader cannabis cultivation policies across Africa.
“It is clear that there is significant potential for cannabis cultivation in the commercial sector, promising substantial revenue for farmers.”
“The full agricultural potential of cannabis and hemp has yet to be harnessed, but there are steps, albeit ‘baby steps’, being made towards realising that potential,” concluded Scriba, Grobler and Kleinsmidt.
- BusinessTech contacted the Department of Agriculture, who referred all of our queries to the Department of Small Business Development (DSBD).
- The DSBD did not provide responses by the time of publication.
Read: R1 billion boost for South Africa’s ‘cannabis capital’
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