This is an excerpt from the CTIC’s Draft Cannabis Commercial Policy Framework (Final revised edition 3 June 2025) which has been put out for public comment.

Generally, there is currently no legal cannabis and hemp industry in South Africa, until the critical regulatory barriers to the establishment and growth of a competitive industry are removed. However, this is not the only challenge. The others are listed below.

1. High Barriers for New Entrants

Currently, the only route into the legal cannabis trade in South Africa is by obtaining a South African Products Regulatory Authority (SAHPRA) license for medical marijuana. Nevertheless, for rural farmers, there are considerable barriers to entry, including an extensive list of quality control measures and infrastructure that need to be implemented, accompanied by prohibitive costs.

It is estimated that the costs for setting up a facility to the required licensing standards and prepare a license application would be as high as R6 million. The application fee alone is approximately R24 000. The current regulations also forbid anyone with a criminal record or any form of drug-related offence from applying for a license, which further restricts the number of small-scale growers.

The current legislative framework allows permits to be issued only to those people or organisations who intend on undertaking research projects. No commercial permits are allowed at the current moment.

Applicants are also required to pay application fees of about R900. They are also required to put up a 2 m high fence around their lands and ensure that the gates are locked for 24 hours. These measures are seen as creating high barriers to resource-poor farmers and companies that would like to enter and participate in the hemp industry. Over time, government must endeavour to review some of these prohibitive application and licence fees, which are seldom discouraging new entrants into the market.

2. Negative Public Perceptions

Cannabis invokes mixed reactions from general public and other stakeholders. Most people feel that government must put more restrictions on this industry to protect vulnerable members of the society against drugs. The opposition to any legalisation of cannabis is associated with the beliefs that it will worsen the public security conditions in the country. There are also strong perceptions that cannabis will serve as a gateway to the use of harder and heavier drugs.

The addictive nature of cannabis raises many concerns. Use of cannabis by adolescents is associated with an increased risk of a range of negative health outcomes, including future depression and anxiety disorders. There are many people who believe that any relaxation of current restrictions will lead to a situation where government will be unable to curb increased illegal trafficking.

3. Seed Supply Challenges

There is currently no formal seed supply system for cannabis due to the fact that it is treated as an illegal commodity. Seed is currently obtained via informal markets and networks. This creates a regulatory challenge in that it is virtually impossible for government to regulate and guarantee the quality of seed that is traded.

The farmers are therefore at risk of being sold poor quality seed with low germination percentages. The availability of seed as and when needed is a serious challenge for producers. The other option is to import seed from other countries, thereby incurring additional costs. This increases overall production costs for farmers.

Private sector engagement on this aspect, therefore, remains crucial and imperative.

4. Manufacturing Challenges

The manufacturing of variety of products from cannabis is a huge challenge for South Africa. There is lack of appropriate machinery and expertise to produce a variety of cannabis products. Manufacturing of a variety of products from raw material is crucial for the sustainability of the cannabis industry. South Africa might be forced to import machinery and the appropriate expertise from other countries.

The long-term solution will be to incentivise local production of the appropriate machinery for cannabis. In South African context, manufacturing is an area which is crucial to attract investment and showcase possibilities in this sector.

5. Research and Development Challenges

Research, development and innovation (RDI) are essential for product development, manufacturing and commercialisation of cannabis products. South Africa has both the innovation and technology capacity to conduct world-class studies on cannabis. Some of the existing and emerging challenges that the cannabis RDI sector will face is limited financial resources across the innovation value chain.

With reference to the above, there is therefore a need to reflect on the current state of facilities/infrastructure that conduct tests and clinical trials in order to give a better understanding of the inadequacies in the system, especially in relation to conducting certain tests or accreditation. Left undone, this may become an impediment in the growth

of the sector.

While the sector is developing rapidly, the so-called Historically Black Universities are still excluded in terms of appropriate human capital and strategic infrastructure.

These institutions are located in rural areas, where most of the poor and marginalised cannabis growers are situated. The challenge will be leveraging resources to finance basic and applied research, pre-clinical and clinical trials, product development, technology demonstration and commercialisation studies.

The focus will be on medical and medicinal cannabis, and to a lesser extent hemp, as sufficient studies have been conducted in South Africa.

6. Proliferation of Unregulated (Illegal) Cannabis Products

South Africa is facing a huge deluge of cannabis products of all kinds. These products range from energy drinks, chocolates, beers, health and beauty products and many others. These products are sold mostly through street vendors, garage shops and smaller retail outlets.

Unfortunately, these products had not gone through any form of regulatory system to test for their safety and efficacies. This means that the general public is consuming drinks and food that had not been approved by any government department or its agencies. The same applies to health and beauty products along with a whole range

of other products that are being sold to the general public.

The problem is that people are being ripped off in terms of their finances and at the same time their health is also at risk.

7. Fragmentation

The cannabis industry is highly fragmented. The main reason for this is that it is still an illegal industry and therefore role players had not come out openly. It is said that there are more than 900 000 smallholder cannabis farmers that are involved in primary production of the commodity. There are also an unknown number of buyers, middlemen, and traders of the commodity. Because of all these factors, there is no single industry body that represents the interests of the majority of these stakeholders.

8. Market Challenges

The legalisation of cannabis will need local and export markets to absorb whatever products that will be produced. Export markets are unpredictable due to shifting rules. As a result, the expectation is for local market to take a bigger share of the produce in the initial stages.

As more countries relax their restrictions on cannabis, it is expected that more export opportunities will open. South Africa currently imports several cannabis products that are sold on the local markets. The low-hanging fruit in terms of creating a local market for the South African cannabis industry is to replace imported products with the locally produced products.

9. Market Concentration

There is potential risk that big corporations with huge financial muscles are to dominate the new cannabis industry in South Africa. This scenario will lead to a situation in which smaller enterprises might be squeezed or even be taken out of the cannabis industry. The total dominance or takeover by big corporates remains one of the serious challenges for the new cannabis industry in this country. It is inevitable that there will be a few corporations which take over and take advantage of this industry.

The global trend is that small-, medium- and large-sized cannabis businesses will be acquired by bigger companies unless they develop a dedicated target market. It will be important for government to use competition laws to deal with this challenge to create an inclusive cannabis industry.

Legalising cannabis will open opportunities to all interested stakeholders, including big business. The challenge for government will be how to avoid a situation where big corporations might try to dominate the whole cannabis and hemp value chains at the expense of rural communities that have been growing these crops for hundreds of years. These communities have been suffering from arrests and imprisonment for years.

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