Trouble for South Africa’s R100 billion-a-year high hope

 ·26 Nov 2023

The South African cannabis industry is facing significant headwinds amid policy uncertainty, a saturated market and poor agricultural processes.

According to the Sunday Times, one of Southern Africa’s largest outdoor cannabis-growing facilities, Highlands Investments, has been auctioned off for just R18.8 million – following a merger worth a reported R560 million in 2021 with wellness brand Goldleaf.

Former Highlands strategic adviser Tony Budden said the company suffered due to oversupply.

The advisor said that the current operating market is difficult to navigate, with overregulation, oversupply and risky outdoor cultivation due to cross-pollination with illicit growers, which could result in unsuitable crops for export.

These issues come despite the 2022 African Cannabis Report stating that the legal African cannabis market was worth $41 million (roughly R750 million).

Budden told the Sunday Times that the sale of Highlands was a warning to others who are trying to take advantage of the medical cannabis market, noting that it is indicative of the problems with the larger industry – too much attention on cultivation and not enough on building new markets.

Regulatory delay

Following the decriminalisation of the personal use of cannabis in 2018, a major “green rush” followed. However, the legislative and regulatory environments are still not up to scratch.

Studies have shown that cultivating and exporting cannabis for medical applications could create R100 billion a year for the South African economy, adding 100,000 desperately needed jobs.

Although President Cyril Ramaphosa in his 2022 and 2023 State of the Nation Addresses said that a fully-fledged cannabis industry would be created, minimal progress has been made due to confusing laws and an industry moving at a snail’s pace.

The President’s economic task team Operation Vulindlela’s review for the year’s second quarter showed that the industry hit an “orange zone” – where reforms still face major headings.

Despite Cabinet promising to commercialise the sector in 2019, Operation Vulindlela said not to expect anything for the sector until 2024.

Amidst the slow progress in reform, operation Vulindlela and the Department of Agriculture Land Reform and Rural Development convened a “Phakisa Action Lab” in June 2023 to get all relevant stakeholders on the same page.

The forum hoped to ensure that there was coherent policy and agreement on the critical implementation of the Cannabis Master Plan.

“Participants collectively agreed to the regulatory reforms required to enable sector development and investment, including reviewing the schedules to the Medicines Act to allow for cannabis grown for industrial purposes; to explore mechanisms to fast-track the removal of cannabis from the Drugs Act; and to reinforce previous instructions to all South African Police Services (SAPS) members to respect the privacy rights of cannabis cultivators and users,” it said.

Although a detailed programme of action from the Phakisa is being finalised, it was said that a further analysis of the sector is being drafted by the Department of Trade and Industry, which could be published by the end of this year.

Key reforms being looked at in the sector include:

  • Scaling up support for the existing projects to support and enable private sector investment in product aggregation, processing, and manufacturing technology for end-user demand.

  • Securing an optimal financing framework that enables private-sector investment with some public-sector financing support

  • Deploying a set of pragmatic interventions concerning investment promotion, export support and standards and conformity assessment.

  • Working with all provinces to further the activities currently underway and ensure alignment across government.

The government is also working on enabling legislative and regulatory reform.

The Portfolio Committee on Justice and Correctional Services also recently opened the Cannabis for Private Purposes Bill for public comment in October, with amendments to the Bill specifically looking at children (under 18 years of age).

Overall, the Bill wants to allow for the cultivation of a stipulated quantity of cannabis plants, the possession of a prescribed amount of cannabis and the use of cannabis.

It also seeks to expunge criminal records of those convicted of possessing or using cannabis or dealing in cannabis based on a presumption.

Read: Big divide over South Africa’s new smoking laws

Show comments
Subscribe to our daily newsletter