There feels like renewed hope in the southern African medical cannabis sector with at least a billion rand of capital investment that has been pledged in recent months. Most of the new investment is going into boosting export production and increasingly it’s evident that the money to be made lies in creating value-added products for the international market rather than just by securing offtake agreements for raw flower.

In the last month there have been three significant investment pledges in the SA medical cannabis industry that are potential economic drivers for Centurion in Gauteng, and KwaZulu Natal, while the Western Cape has its own dynamic where the value chain is more developed.

Leading the new charge in coughing up fresh cash for the SA cannabis industry is Nigerian entrepreneur and SafriCanna founder, Bashid Haidar who’s commitment of around R720 million (US$40 million) to the company’s Centurion facility may be a game changer for the area. He’s expanding capacity by acquiring more land so as to produce up to 25 tons of medical cannabis within five years’ time.

In the area is also Cilo Cybin’s facility, which is the only South African holder of all three types of SAHPRA cannabis licenses. Founder Gabriel Theron intends trying to relist it on the JSE as a Special Acquisition Vehicle with the support of Malaysian biotech company…., who have underwritten the initiative with R54 million. 

One of Theron’s business aims is for Cilo Cybin to be a third party manufacturer/processor for other cannabis enterprises as well as develop his own product range.

Between these two companies’ investment plans for the Centurion/Midrand area, there will be a plethora of support services that will be required, ranging from scientific support to product purchasing. These will generate new entrepreneurial opportunities across the cannabis value chain and will go some way to creating new jobs.

Many stakeholders were cynical of President Cyril Ramaphosa’s February 2023 State of the Nation Address (SONA) in which he recommitted himself to creating an inclusive and job creating cannabis regulatory framework. 

He backed up his words with introducing cannabis for the first time to his Presidential Investment Conference in March 2023, and secured a pledge there from Tri Medi Canna to invest R121 million to build a cannabis and hemp industrial park in KwaZulu Natal. He’s also said there’s a high-level finance team working behind the scenes to put together a blended financing scheme involving public and private sector funding and a blend of loans and grants.

In the last month or so, state legislators have indicated that cannabis is going to be removed from the “scope and purview” of the Drugs and Drug Trafficking Act of 2022, which will be a major impediment-remover for cannabis financing.

This has been a frustrating bone of contention for cannabis stakeholders and the fact that the State is doing a U-turn on cannabis being listed as a scheduled, undesirable substance just three months after bringing the Bill into law, shows that someone in the corridors of power is actually listening. 

Much credit for this must go to the President’s cannabis advisor Garth Strachan, who has been working hard behind the scenes to try and align different government departments behind a single cannabis strategy.

It’s believed he was instrumental in getting cannabis investment included for the first time in South Africa’s country investment strategy but has warned that the wheels of trying to establish a “sunrise” industry inevitably grind slowly.

Listed cannabis group Labat Africa’s CEO Brian van Rooyen recently said there was over …..of investment for the SA cannabis industry if only Government could provide a clear regulatory framework. Labat itself has stared down the dark night of the soul but said in February 2023 that two key divisions were now profitable – most importantly it’s Sweetwater Aquaponics cultivation and processing facility at Kenton-on-Sea in the Eastern Cape and its CannaAfrica retail division.

Sweetwaters has already fulfilled offtake agreements to Australia and, as we understand, to Switzerland as well. 

Australia has also been identified as an important export destination by Cilo Cybin and SafriCanna, while Germany is forefront of the mind of every cannabis exporter as the country moves rapidly to regulating a legal cannabis market.

Interestingly Poland is featuring in the business plans of both SafriCanna and Lesotho’s MG Health, while North Macedonia is likely to emerge as a large customer because of they way it’s positioning itself as a European cannabis distribution hub.

While South African recreational, or adult-use, legalization still remains contentious in State thinking, it’s clear that stakeholders in the medical cannabis sector are starting to find traction.

In recent news MG Health in Lesotho announced it had attracted international investment support to the tune of US18 million and that intended to use this money to triple capacity to service increasing international demand.

Meanwhile in the Western Cape there’s a different cannabis dynamic underway since the release of the Province’s CanPlan. Commercially, the emergence of the Impilovest group late last year is of significance, while Stellenbosch-based Felbridge Medical has already established itself as a leading cannabis nursery, particularly in the supply of tissue culture to markets such as Switzerland and North Macedonia.

Paarl-based botanicals extraction and manufacturing firm, Afriplex, is a core part of Impilovest’s aim to infuse itself across the value chain. The group raised an unknown amount of capital from international investors last year and has put this to good use already with Afriplex announcing a new CBD extraction technology and plans to set up a CBG processing facility in Canada.

The Impilovest model is innovative in that it is not as capital intensive as the other SA cannabis groups and under the guidance of Afriplex’s Danie Nel, has sought to create a merger of key players along the value chain: notably Releaf Pharmaceuticals.

The main region missing in action right now in terms of medicinal cannabis is the Vaal Triangle, which was fanfared by the previous ANC Gauteng administration as the future centre of industrial cannabis and hemp production in the province. David Makhura’s administration came up with grand plans to establish a Special Economic Zone in the area which would allow special dispensation to cannabis companies. SEZ’s for both the Vaal Triangle and West Rand have been on the drawing board for some time now.

There was also talk of transforming OR Tambo International into its own special cannabis export zone but nothing has materialized since Makhuru and Parks Tau were dropped from the Gauteng provincial government late last year.

In summary there is a noticeable shift underway since the President’s SONA 2023 address in that cannabis has been removed from the Drugs Act and that opens the way for solid international and local investment, particularly in the medical cannabis cultivation and value-add market. This has already had an effect in that at least a billion rand will find its way into this industry in the next 12 months and that this will have a multiplier effect on support services, state revenue and job creation.

Having said that, there is the small question of whether there will be enough electricity available to drive the production of industrial medical cannabis over the next 12 months. The sector is a high energy consumer and the uncertainty over the national grid and the increasing power outages could put the operations outlined above at risk and make it challenging to fulfil international obligations.

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