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5 Biggest Gaps in the Emerging Legal SA Cannabis Market

The Gibbs Business School in Johannesburg hosted a webinar on the emerging legal cannabis industry in South Africa. The virtual discussion on 25 June 2021 attended by over 170 participants, focussed on the strengths of the southern African cannabis market and where the gaps lie for budding cannabis entrepreneurs.

Co-hosted by Cheeba Africa, the webinar’s panelists were Trenton Birch (Cheeba), Sibusiso Xaba (Africa Cannabis Advisory Group), Pierre van den Hoven (Silverleaf Investments), Thebogo Thlopane (Cannabis Trade Association Africa) and Brett Hilton-Barber (Cannabiz Africa).  

 

South Africa’s strengths in attracting cannabis investors:

  • Good infrastructure
  • Skilled and mature labour force
  • Natural foundational base for agriculture;
  • Established farming communities
  • Well-developed economic environment – banking and trade relationships
  • Well-positioned for the export market
  • Great local market potential;
  • Strong genetics and landraces;

 

Key Quote: Trenton Birch (Cheeba Africa, panel host): “Confidence is the biggest barrier to market entry”.

 

READ ALL SA CANNABIS STORIES

 

This is the Cannabiz Africa Take-Out on where the opportunities lie in the emerging legal African cannabis market.

 

Cultivation

  • SA’s strength will always be as a primary producer of agricultural crops. Although there are many opportunities higher up the value chain, agriculture will be the natural foundational base for an SA cannabis industry, particularly if adult-use is not only legalized but commercialized.
  • Under the current licensing regime, there are three basic opportunities:
    • Medicinal Cannabis: a Section 22 (i) license is required from the South African Health Products Regulatory Authority, which is the only cultivation opportunity, limited to those with deep pockets (R15 million) to invest in a GAP/GMP EU compliant facility, for whom there is a handsome ROI at the current offtake value of approx. US$3 000/kg (New Frontier Data);
    • Hemp: the regulatory framework is not yet in place and will require significant investment in agri-processing hubs for a local industry to get off the ground – some existing hemp research licenses have been renewed and government has indicated it wants enacting legislation passed by October 2021, but that remains to be seen.
    • Adult-Use Cannabis: although the Consititutional Court has decriminalized the private use of cannabis, government is opposed to commercializing ‘recreational’ used. “Ironically, this is the biggest opportunity to unleash a cannabis economy in SA, but instead of putting this issue at the front of the queue, government has put it at the back. I think we’re at least two years away from unlocking the potential here” (van den Hover).

 

 

Genetics

  • South Africa has world-class genetics, and a treasure trove of landraces that have yet to be truly understood. 
  • SA strains such as Durban Poison, Rooibaard and Transkei Gold are all internationally known.

 

 

Technology

  • The cannabis industry finds itself at an unprecedented point in time where health, agriculture and technology and intersecting; 
  • besides cultivation, the development of technology offers the most opportunity for the tech-savvy African entrepreneur; the gap in tech lies in three main areas:
    • Compliance and testing
    • Economic efficiencies
    • customer acquisition/understanding 
    • R&D

 

 

Auxillary Services

  • “Remember, the people who made most of the money out of the gold rush were the guys who sold the picks and shovels to the miners”, says van der Hoven: 
  • Among the immediate gaps in this market are
    • Specialist financing and insurance
    • Labs and testing equipment
    • Legal and consulting services
    • Compliance services
    • Training and recruitment
    • Negotition of offtake agreements

 

 

Retail

  • Opportunities in the retail space are limited mostly because of the lack of an over-arching CBD framework in SA; 
  • Many CBD products on the shelves are illegal, and there is uncertainty over what is actually allowed in terms of cannabis products; 
  • Right now CBD franchises appear to offer the most value, but 
  • new product development will open up, along with retail opportunities when:
    • there is legal clarity on CBD/THC guidelines and the role of private cannabis clubs, and
    • when cannabis processors are allowed to source raw product locally

 

For the full Gibbs Business School Webinar, click here!

 

 

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