German Legalization Could Spark Boom For South African Cannabis (If Government Gets Out of the Way)
Bonno
‘Germany’s lucrative market is the game-changer, but we are not our best friends here in South Africa. Expensive permits; long approval wait times are self-defeating’, says Dikeledi Matla, chairperson of the Soweto Cannabis Alliance Forum.
The forum seeks to coordinate together Black medical cannabis players in the country’s most populous township and enter the niche export market.
Despite cannabis legalization, South Africa’s government is ‘a beast’ when dealing with the domestic industry players, Cannabis Culture reported in July when it documented entrepreneurs who feel hard done.
Though being Africa’s leading cannabis cultivator, South Africa has no huge domestic medical cannabis market at scale. So, her cultivators must set their eyes on shipping to the likes of Germany, Matla says. Hence, in December 2021, a record 2, 125 tons of medical cannabis was shipped from South Africa to North Macedonia
German juggernaut
According to Prohibition Partners European Cannabis Report 7th Edition, Germany’s medical cannabis patient demographic has doubled since 2017. Her medical cannabis startups are on a money-raising spree with Frankfurt-based Cansativa Group recently attracting $15mn in seed funding, and Berlin-based Sanity Group so far pulling over $76mn. General sales of medical cannabis in Germany in 2022 pulled in $0.4bn US with the figure expected to reach $0.6bn US in 2025.
‘There’s little doubt Germany is where the money is but in South Africa as usual, we score our own goals,’ Matla says.
The irony is, that South Africa, which is Africa’s leading cannabis cultivator, is putting so many obstacles on her domestic medical cannabis entrepreneurs, says Matla. For example, his wait for a license to grow medical hemp in a greenhouse has languished for 10 months without an answer from regulators, he says.
Hard license regime
The biggest hardship that South Africa’s medical cannabis players hoping for a slice of the German market face is the South Africa Health Products Regulatory Authority (SAHPRA). This is a government agency tasked with regulating animal, human, and plant health products.
According to Cliffe Dekker Hofmeyr, the SAHPRA cannabis license fee is ZAR 902 ($59) per hemp application, ZAR 23 980 ($1410) per medicinal application, an inspection fee of ZAR 714 ($42) per hour, and a fee of ZAR 3180 ($186) on picking up the hard copy license.
‘We are told by industry players that it’s an expensive, and unclear process especially for small-scale medical cannabis hopefuls wishing to enter the export scene,” says Dennis Juru, president of The South Africa International Cross-border Traders Association, a lobby for EU-like borderless trade in the southern Africa region.
If the licensing regime was swift, medical cannabis hoping for the lucrative export market would work their way around meeting the fees, says Matla, the industry player.
‘The cannabis license application form is a weighty 20 pages. You lodge a license today and don’t hear from SAHPRA for six months,’ he says.
The process to obtain a license from SAHPRA to grow cannabis for medicinal purposes is a ‘rigorous one’ SAHPRA openly says. It defends its regime as necessary because South Africa is a signatory to the International Narcotics Control Board.
‘By the time one wants to ship the product abroad, a significant loss would have been registered,’ Matla says.
Germany strict standards
But to ship medical cannabis to Germany, there is another external headache that South Africa’s producers must tackle.
South Africa’s cannabis growers must first obtain the European Union’s Good Manufacturing Practice (GMP) stamp of approval. This means a long and exhaustive inspection of where the cannabis is produced and the cannabis itself. The EU is not taking chances with agricultural products coming from South Africa. In July it rejected tons of fruit that had already landed from South Africa for phytosanitary reasons.
Europe is going to become the biggest market, so even if the cannabis market of the US and Canada don’t require that certification, it is in the best interests of South Africa’s medical cannabis exporters to work towards obtaining that EU GMP certification. This will place the country firmly in the pipeline to exploit the EU market, Stephen Murphy, CEO of Prohibition Partners told lawmakers during a presentation as part of the European Union (EU) Delegation to South Africa in May.
Lesotho dark horse
There’s a credible likelihood that if South Africa doesn’t solve the internal and external hurdles facing her medical cannabis producers, neighbor ‘dark horses’ Lesotho and Zimbabwe could pip her to the post in the EU market.
‘Lesotho is ambitious,’ says Carter Mavhiza an independent public accountant and auctioneer. ‘Lesotho sees South Africa’s slow speed as a chance. There’s a reason why some South Africa-registered medical cannabis growers chose to do legal business in Lesotho,’ he says citing the growth of contract cultivation models in Lesotho.
Lesotho received its EU GMP Approval, in 2021, leaning on the networks cultivated with German partners.
Another dark horse that could capitalize on South Africa’s struggle with exporting to the EU is nearby Zimbabwe. ‘Zimbabwe doesn’t waste time, its domestic medical cannabis licensing regime is effective and fast because the government there is highly centralized and their army is also has a stake in medical cannabis,’ says Matla, the industry player. He cited how in September Zimbabwe licensed a record 57 medical cannabis players and exported 30 tons of hemp to Switzerland in 2021.
‘That speed of bureaucracy is worth emulating for South Africa,’ he adds.
