Cannabis opportunities in South Africa

On 18 September 2018, the Constitutional Court of South Africa had the following ruling in an unanimous decision:

  • An adult person may, use or be in possession of cannabis for his or her personal consumption in private
  • The use or possession of cannabis in private other than by an adult for his or her personal consumption is not permitted
  • The cultivation of cannabis by an adult in a private place for his or her personal consumption in private is no longer a criminal offense.

The court decision placed no limits on the quantities that adults are allowed to carry, consume or grow and that it would be up to the parliament to draw a bill that would include these changes. The government was given a 24 month period to implement the changes in legislation. The use of cannabis was thus officially decriminalized, the same holds true for the neighboring countries of Lesotho and Zimbabwe, albeit that Zimbabwe only legalized the medical use of cannabis and not recreational use. However, in the other neighboring countries of Swaziland, Namibia, and Mozambique the use of cannabis is still illegal.

Status of policy and laws regarding cannabis use and cultivation in South Africa
The current parliament has not yet amended the law to formalize the ruling by the court, but in the meantime, the personal use of cannabis is allowed. However the sale and purchase of cannabis are still illegal in South Africa. Anyone involved in these activities can still face harsh punishments. It appears that those who want to consume cannabis are, for now, restricted to buying seeds and cultivating their own cannabis for personal use.

Recently a spokesman for the South African Ministry of Health said that the government is still examining the cannabis policies in the United States and Uruguay in terms of their impact on health and crime. The ministry of Health recognizes the medical benefits of cannabis but is still hesitant for full industrialization. The spokesman also said that the government is looking at the strict requirements for obtaining licenses for medical cannabis. In line with these statements Tito Mboweni, the Finance Minister of South Africa said in a speech that there will be a change in the law regarding the cannabis industry so that it could become a potential source for revenue. This shows that there is considerable political will within the government to further the process of legislation surrounding the cultivation and sale of cannabis.

Nevertheless, the process of obtaining license to cultivate medical cannabis is tedious which discourages companies from attempting to do it. Only those with enough resources in both time and money are often able to obtain such a license. The government has an official document that lays out all the requirements. Suffice to say that there are a lot of requirements before the government will grant a license to legally cultivate cannabis for medical use. The government is likely to address the issue but this is unlikely to occur before the parliamentary elections on the 8th May 2019.

Despite the difficult process to obtain a license, it is not impossible as on the 4th of April 2019 the South African Health Products Regulatory Authority (SAHPRA) awarded the first cannabis cultivation license to a company called House of Hemp.  This company will conduct further research on the medical use of cannabis and hopes to prove conclusively the positive medical effects of cannabis.

Business opportunity
Currently, there is only one company which actually received a license to cultivate cannabis, and according to one report, there are about 20 other companies in the process of obtaining a license to sell cannabis-related products. At the same time however, as of 6th  February 2019, only 56 individuals are using cannabis related medical products under a special dispensation. In addition, the department of Health is examining the applications of 36 companies that applied for commercial hemp cultivation. The area that will be used for cultivation, under these applications, ranges from 2ha to 20ha. The market is still in the beginning phase and the government & parliament still need to formalize the market to a large extent. But according to Senzeni Zokwana, the minister of Agriculture, Forestry, and Fisheries, multiple government ministries and agencies are busy with developing a new regulatory framework to facilitate the commercial production of hemp.

Despite the difficulties and uncertainties surrounding the cannabis market the potential to generate revenue and business in South Africa is considerable, to say the least. WHO officials estimate that South Africa is the third largest producer of cannabis in the world, cultivating some 2,500 tons of cannabis a year. According to the Medical Research Council, the number of cannabis users in South Africa was approximately 3,2 million in 2008. Thus it appears that the majority of cultivated cannabis is likely to be determined for export and in some estimates, the total cannabis business could worth 1,9 Billion USD. In contrast, the entire cannabis market in Africa is estimated to be around 7 billion USD if fully legalized.

In the short term, there are still obstacles in the market, predominately the fact that the sale of cannabis is still illegal and only a few individuals have received a dispensation for the use of medical cannabis. In addition, the market in South Africa is not huge and in the majority of other Southern African countries cannabis is still largely criminalized. However, there are significant markets in the Americas with some US states presenting a common market of 1 billion USD and the Canadian market presenting a market of 6 billion USD. When the government legalizes the cultivation of cannabis for export the business potential is thus significant.

It is important to note that hemp as a product is not limited to cannabis as a medicinal or recreational drug. It can serve as a basis to many products examples include, wellness products, rope, sail canvas, clothing, insulating material, plastic and composite materials, paper, knotted jewelry, animal bedding, biofuel and water, and soil purification. Industrial hemp thus provides many avenues for potential business opportunities. Dutch companies should take a broad view if industrial cultivation is legalized South African hemp products could, for example, be sold in Amsterdam or other cities. In addition, hemp products could be used as a climate-smart alternative to pure plastic products in terms of their biodegradability.

According to Wandile Sihlobo, the chief economist at the agriculture business chamber of South Africa, the provinces of Eastern Cape, KwaZulu-Natal & Limpopo are ideal provinces for cultivation in terms of climate, and these provinces would also benefit from the commerce and jobs that derive from the cultivation and export of cannabis. The business opportunities for Dutch companies in South Africa with regards to the cannabis market would be in the cultivating process, the cultivation will require knowledge on the growth process of cannabis and the harvest process. Other opportunities are in the transport and export of cannabis. Dutch knowledge of agriculture and transportation could be of significant value to potential cannabis farmers. Dutch companies with significant knowledge or products in greenhouse farming could potentially also offer their services to companies who have received a license to cultivate cannabis.

If companies have interest their first contact should be with House of Hemp to gather information on how this organization went about the application process of a growing license. The organization called Dagga Couple was found by Julian Stobbs and Myrtle Clarke after they were arrested for cannabis possession and sale, they decided to sue to the government instead of pleading guilty. This organization along with Fields of Green for All are pro-cannabis lobbyist organization which advocates for cannabis legalization and provides legal aid to citizens who have been arrested on cannabis-related charges. These pro-cannabis organization could be contacted for information about the legal difficulties of individuals and companies.

The cannabis market in South Africa is still young, however, if Dutch companies want to be involved in this market it is advisable to already seek local partners for it is likely that the government will want to use the potential economic value to promote development in the poorer regions in the country.

Who are the main players
The main player in this regard is the South African Health Products Regulatory Authority, this is the organization which is currently providing a license for the cultivation of medical cannabis.

Other relevant government agencies are the ministry of Agriculture, Forestry and Fisheries, the department of Health, the department of Justice & Constitutional development, department of Trade & Industry and Environmental Affairs, the Agriculture Research Council, and the Council for Scientific and Industrial Research.

Lastly, there is the national parliament which will need to introduce the law that will formally legalize the personal use of cannabis, and the potentially the cultivation and sale of cannabis. The three major political parties, African National Congress, Democratic Alliance, and the Economic Freedom Fighters will be decisive in how much of the cannabis market will be legalized. 


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