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Ready for expansion

Current and projected cannabis trade with South Africa

Medical cannabis leads the charge of existing trade between Germany and South Africa with an estimated €27 million worth of transactions perfected in 2023. The world is flat when it comes to ease of multinational trade, opening the growing fields to buyers across all regions including from South Africa. A plea for the “African Gold“ by Josh Swart.

As of October 2020, South African citizenry have been able to apply for licenses for both medical cannabis and industrial hemp farming. The South African Health Product Regulatory Authority (SAHPRA) regulates medical cannabis cultivation under the Department of Health while the ­Department of Agriculture Land Reform and Rural Development presides over industrial hemp farming. South Africa waits in baited breath for the passing of their Cannabis for Private ­Purposes Bill, which is set to pass early to mid 2024, albeit five years behind schedule. The passing of this Bill will have little to no implications on the granting of the aforementioned licenses, ensuring legal consistency through this transition to access to personal use cannabis. 

South Africa is known for its rich agricultural sector and now is poised to play a significant role in this burgeoning market. From craft terpene rich flowers to hundred tons of grain from hemp, the market is ready for South Africa to flex its strengths. 

The quality of the flower, and in turn the high quality extracts, are testament to a host of input factors. These include high quality (imported) genetics, increased prevalence of sunlight hours (vastly more than that of Europe), professional cultivation environments, adequate regulation, and equipped processors/extractors. As the world is at the infancy of medical discovery of cannabis and its effects on the human body, the international variety of sources of cannabis expands the possibility of German medical discovery. Given the climate of recent updates reclassifying cannabis as a non-narcotic, one can expect the realization of research and developmental funding in this space as well as private sector initiatives.  

Expanding markets need influx of quality product

The recent legal cannabis updates in Germany have resulted in not only cannabis stocks hiking but also the initiation of expansion plans within these listed organizations. This increased market activity is the rising tide lifting all boats. MediPharm alone increased the amount of approved German cannabis medical products from 5 to 14 of their own products. Canopy Growth shares sentiments of commercial expansion and IM Cannabis enjoyed a 180% growth in 2023 and expected stronger results amidst the new favorable legal climate. 

Photo: Only Farms

South Africa hosts over 100 medical cannabis growing facilities and over 400 hemp license holders. The medical cannabis is processed by multiple EU-GMP certified facilities like Green Engineering Solutions, a local industry leading extraction facility exporting the highest grade extracts worldwide. Comparatively, the input costs of medical cannabis cultivation versus the high level of end-product and high market retail value finds robust capital investment making its way into South Africa to the tune of €100 million in 2021. Industry service providers, Only Farms have created an online legally permissible transacting marketplace for stakeholders to find desired cultivators or buyers in South Africa catering to the worldwide market. All supply that is handled by this platform requires either a SAHPRA medical cannabis license or a Department of Agriculture Hemp permit. 

We find further existing non-commercial links between South Africa and Germany in the trial of a Private Cannabis Club. South African private social club service providers, Grow One Africa, has begun a trial of their model supporting a club in Hannover in 2024. The track and trace technology keeps record of cultivators feeding into private social clubs sharing cannabis with vetted members. Having only been in operation for three years, Grow One Africa has been able to provide technical (track and trace) support to clubs that have cumulatively turned over €4.8 Million across the 20 clubs hosting 8000 members to date. While the limit on the number of members in a cultivation club is 500 in Germany, we cannot overlook the monetary value of this distribution channel. 

Cannabis cultivated in South Africa is taking to the international market incredibly well with the demand for the “African Gold” extract ever increasing. African sourced cannabis products are more favored by consumers as witnessed in Hong Kong and other oriental nations’ retail behavior. Both the Dutch and Israel are developing medical products from African sourced cannabis yielding impressive results with increased strength, purity and variety of cannabinoids.  

Local production capacity able to meet growing demand

With local production capacity of over 300 kg of flower per site per month at a host of cultivation sites, South Africa is able to meet the constant demand catering to the medical cannabis supply chain. EU-GMP standards are maintained throughout processing or extracting, allowing for medically grown cannabis to enter the German medical market. 

Until now, it is exclusively cannabis grown for medical purposes in South Africa that joins the international supply chain. We are yet to see if the new cannabis legal dispensation will support the international trade of non-commercial responsible adult use cannabis. Sharp legal practitioners might pave a way for clubs to distribute responsible adult use (recreational) cannabis sourced from all over the world, inviting an incredible experience for cannabis enthusiasts. 

In consideration of geo-arbitrage, the monetary cost of procuring cannabis from South Africa is comparatively low while the product is comparatively of high quality. Investments can take the shape of buying shares in existing private companies, entering off-take agreements from a straightforward commercial interest, establishing a multinational subsidiary of your existing organization and other investments like the selling of intellectual property or industry needed machinery and operating procedures.

Ultimately, we excite further integration of medical cannabis cultivated in South Africa to be included in the German medical cannabis supply chain. While the bulk of the monetary value rests in the medical cannabis supply chain, we are not quick to overlook the value of derivative industries namely industrial hemp cultivation and distribution through the private cannabis clubs or cultivation clubs. South Africa grows in leaps and bounds with cannabis development both in the private and public sectors. Businesses seeking to connect with South African stakeholders are encouraged to follow through.