4 minute read
Trends: Cannabis business
from AI2 2021
by nustobaydo
GREEN IS THE NEW GOLD
The use of cannabis in South Africa was legalised in 2018 by the Constitutional Court and the country is well on its way to taking the lion ’ s share of the African legal cannabis market. But, what steps should be taken to get there?
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JANINE SELLICKS
Cannabis history in South Africa stretches as far back as pre-1652, with some evidence of its use existing among indigenous Khoisan and Bantu people before European settlement. Interestingly, the Afrikaans term ‘dagga’ commonly used to reference cannabis, is derived from the Khoikhoi word dacha. While little information is available on how much the cannabis industry was worth before it was legalised, Interpol rated South Africa as the fourth-largest cannabis producer in the world in 2003. However, estimates in 2021 put the country ’s domestic market for cannabis and related products at about R28 billion ($1.9 billion). Current major global cannabis producers include the United States, Canada, Mexico and China.
The Department of Agriculture, Land Reform and Rural Development incorporated lessons learnt from these major players to craft a strategy for the industrialisation and commercialisation of cannabis in South Africa. The government unveiled this master plan in August 2021, aimed at harnessing the lucrative cannabis industry to potentially create 10 000–25 000 much-needed jobs, spur economic growth, and help attract foreign investment. South Africa already has a massive market of close to 900 000 cannabis farmers in the Dagga Belt: Eastern Cape, Western Cape and KwaZulu-Natal. The regions’ climate is suitable for growing high-quality products at a low cost and will likely become South Africa’s cannabis hubs.
REGULATIONS AND LIMITATIONS
Entrepreneurs are excited at the prospect of SA’s massive legacy cannabis economy entering an emerging global market, however, there are limitations. The 2018 judgement called for legislation to allow consumption of cannabis only in private and not for legal sale; meaning private consumption of cannabis is legal but it is still not legal to buy or sell it. Charl Henning, from non-profit organisation Fields of Green for All, further said, “Any trade in cannabis in South Africa is still illegal, except for some imported CBD and hemp products. ”
Despite these limitations, there are legal workarounds. For example, businesses like Marijuana SA (an online store) stays on the legal side as it supplies equipment and education to grow plants. The key areas of investments are the cultivation of cannabis, followed by the extraction of oil from the plant, testing laboratories, and the retail and branding of CBD products this according to SilverLeaf Investments’ joint CEO Pierre van der Hoven. The emergence of CBD products in big retail pharmacies such as Dis-Chem and Clicks proves there are investment prospects at the retail end of the value chain.
Pierre added, “As the industry grows, there will be a demand for services such as greenhouses, nutrients, plant growers, quality control systems and software. ” Global demand for medical cannabis is growing, creating investment opportunities in the manufacture of pharmaceutical cannabis products. The medicinal use of cannabis round the world is exploding and this requires high levels of production of cannabinoids extracted from the plant. However, this is currently not a well-developed area in South Africa and requires a licence from the South African Health Products Regulatory Authority (SAHPRA).
BUSINESS OPPORTUNITIES
Aside from medical cannabis opportunities, another area that is growing rapidly is the demand for edibles. Edibles are foods and beverages infused with cannabis, which offers another way of consuming cannabis that does not involve smoking. They contain cannabinoids – chemical compounds found in cannabis – and the extraction of this key ingredient is a huge growth area, especially for South African companies.
The industry can be broken down into plant-touching (handling the plant itself) and ancillary (supporting the growth, processing and sale of products). Plant-touching opportunities include breeder, cultivator, extractor and manufacturer while ancillary businesses include data platforms, tech companies, point-of-sale systems, payment processors, digital marketers, cannabis lawyers and cannabis accountants.
Cilo Cybin Pharmaceutical has become the first SA company to be granted such a licence for the pharmaceutical manufacture, product testing, processing and final packaging of cannabis products per the Pharmaceutical Inspection Co-operation Scheme (PIC/S) standards. Gabriel Theron, President and CEO of Cilo Cybin, said, “Accreditation from SAHPRA heralds a significant breakthrough for the company. We are now allowed final processing of cannabis THC and CBD products ranging from oils and tinctures to topicals. We can also do final packaging and labelling ready for the end consumer. ”
IMPORT AND EXPORT
A licence issued by SAHPRA is required for the import, export and distribution of a cannabis-containing product. Manufacturers and importers of a CBD-containing medicine (including complementary medicine) must own a licence issued by SAHPRA. Currently, in South Africa, most medicinal cannabis products are for export. As the local CBD markets are attracting more customers, and big retailers are now stocking products, the focus must shift towards developing local markets and branch out into the rest of Africa.
“We do not have to rely on foreign opioids when we could produce a more affordable painkiller that comes from cannabis grown in Africa, ” said Pierre. South Africa is perfectly poised to take advantage of the Green Gold Rush, especially considering the worldwide cannabis industry is projected to reach $90.4 billion by 2026. A
