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CANNABIS INDUSTRY 

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Smackdown Coming: SAHPRA License Holders Dump Flower into Local Illegal Market as Barriers to Legal Exports Mount Up

Smackdown Coming: SAHPRA License Holders Dump Flower into Local Illegal Market as Barriers to Legal Exports Mount Up

It’s just a matter of time before there’s legal action against SAHPRA licensed growers in at least three provinces who have been getting rid of their export rejects into the local illegal market. Or not! Who knows?

Brett Hilton-Barber

24 November 2022 at 13:00:00

One statistic tells it all. Of the 80 or so cannabis cultivators licensed by SAHPRA, perhaps five have actually managed to export their harvests. That’s less than seven percent!  


If one considers the capital outlay required to be SAHPRA compliant, that represents billions of rands worth of capital that is not getting a return. Goodleaf CEO Warren Shewitz has estimated that up to US$5 billion has been invested in the South African cannabis industry and even though he’s bullish about the sector in the long run he acknowledges the trickiness of the current regulatory environment and that no-one is getting serious returns.


Cannabis activist and lawyer Ricky Stone first raised the issue when he told Parliament in May 2022 that he had evidence that licensed producers were offloading the flower they couldn’t export onto the local illegal market. He said this was creating a glut in the domestic “recreational” market and that a cannabis stockpile was building in Mpondoland. Stone told MP’s that under customary law the commercial trade in cannabis in traditional areas was legal in terms of UN heritage conventions, and that it was unfair that traditional farmers were being economically deprived of their livelihood.


He pointed out that President Cyril Ramaphosa had made it his priority earlier this year to provide support for traditional cannabis farmers in order to bring them into the mainstream economy. However, all current cannabis-related legislation on the table will have the opposite effect, a situation which Cheeba Africa’s Trenton Birch calls an “absolute disgrace”.


During the recent cannabis protests, the Government promised to fast-track urgent interim measures to protect legacy growers, but nothing has happened.


“There’s more ‘legal’ cannabis on the black market than ever before” says a leading cannabis industry insider, who chose to remain anonymous: “licensed growers are finding it difficult to fulfil offtake agreements because many thought that a Section 22 license from SAHPRA automatically entitled you to export overseas. This is not the case because SAHPRA’s standards are not on par with EU GMP specs and that even when you’ve got a SAHPRA license there are still additional compliance measures if you are to export.


“One of the problems is many prospective cultivators have been given the wrong advice. They’ve spent the minimum in order to comply with SAHPRA standards in order to leverage that into raising capital, and then find they have to spend a whole lot extra in order to meet international specifications, with each market having its own rules - and right now there are not large amounts of capital available for investment in cannabis, and many growers are having to make uncomfortable choices.”


“The situation is bad” he says. “A lot of people are going to get hurt and get out of this space”.

Cannabiz Africa understands that Stone has contacted SAHPRA but has not had any meaningful response. Cannabiz Africa has mailed SAHPRA to find out whether it intends taking action against rogue license-holders but has not had any response either. For SAHPRA license-holders to be dumping product locally, not only defies their license conditions but is also in contravention of the Drugs and Drug Trafficking Bill of 2022. When this comes into law, cannabis with a THC percentage of greater than 0,2% will continue to be criminalized, effectively preventing commercial trade in the plant.


An Eastern Cape source tells Cannabiz Africa that elements within the law enforcement cluster have the most to lose if South Africa legalizes cannabis. He says by Government’s own estimations the industry is worth R28 billion a year, of which 90% is going into the illegal adult use market locally and abroad. “Bribery is rife” he said, posing the question as to how high up this went.


A complicating factor is that Justice Minister Ronald Lamola is one of President Ramaphosa’s staunchest political allies but sits across the fence from his boss on cannabis issues. Lamola is in charge if the state’s legal drafting department, the police and correctional services cluster, and under his watch, none of the cannabis reforms promised by the Government are seeing the light of day, in that:

  • Cannabis was removed from the Drugs Act schedule by Sarel Robbertse’s team and then mysteriously re-inserted, apparently on orders from above;

  • THC% limits for hemp and CBD products have been set at 0,2%, which is against the advice of Government’s own experts (this effectively means that a hemp farmer, who’s crop has a higher THC% than 0,2 is open to prosecution under the Drugs Trafficking Act);

  • The Cannabis for Private Purposes Bill is fraught with constitutionally-flawed contradictions and does not take into account traditional healers or growers – or anyone who does not have access to private property for that matter; yet it is due to be passed into law within months;

“The net effect is that the Department of Justice has chosen to continue criminalizing every cannabis stakeholder – the legacy growers, the traditional healers, the township entrepreneurs, private cannabis clubs, and now, SAHPRA license holders are finding themselves running foul of the law, and everyone is just trying to stay alive” says the Eastern Cape source. “This makes the whole industry vulnerable to corruption in the most frightening way”.

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