The year ahead will see a reconfiguration of South Africa’s cannabis business landscape as efficiencies become the name of the game while companies struggle to navigate the uncertain regulatory environment. As always there will be losers and there will be winners! Either way it's going to be tough.
For the entrepreneur “first mover advantage” in the South African cannabis space has been a punch in the face and then a kick in the groin. The industry is going into the new year bruised and frustrated.
The punch in the face was promise of a National Cannabis Master Plan, drawn up by the Agriculture Department (DALRRD) which was big on concept but so unworkable that Nedlac threw it out last year and told it to “co-create” a new vision with non-Government stakeholders. Nothing has since really happened and Agriculture has turned its focus on drawing up an unfeasible hemp permit regime!
The kick in the groin is that the Department of Justice has shown its Putinesque intention to keep criminalizing cannabis despite the fact that this is contrary to executive policy. Quite how it managed this sleight of hand is either due to Justice Minister Roland Lamola's prohibitionist street cunning or President Ramaphosa being asleep at the wheel.
Had sensible minds prevailed, South Africa could have been going into 2023 with:
A halt to all cannabis arrests while a new legal framework is developed;
An over-arching cannabis law that regulates the sector and enables commercial trade;
A mechanism to bring legacy growers into the mainstream;
The incorporation of the Private Cannabis Club model into the Cannabis for Private Purposes Bill;
The promised elimination of cannabis as a scheduled substance in the Drugs Act;
A cohesive medical cannabis scheme that works for the patient and allows more access for more people;
A regulated, legal domestic market for cannabis and related products;
The repeal of the 0,2% THC restrictions in CBD products that cut us out of competing in the lucrative European market;
A 0,1% THC limit in hemp that is appropriate to our region;
All of this could have been enacted by Parliament in 2022 after extensive discussion and public input. Instead, we have simply a mess of squandered opportunities either born of incompetence or criminality.
None of the major parties are opposed to cannabis legalization, its just that the Department of Justice has made their jobs impossible. State lawyers have presented some of the most embarrassing legislation put before Parliament by framing all cannabis legislation in a prohibitive framework contrary to Government policy. No wonder the resultant laws are a hash!
Government has seriously dropped the private and community sectors by its inability to follow through on its promises to redress the regulatory environment. For the private sector, this has meant continual frustration and a panic to find funds to keep going.
This has already prompted a wave of consolidation through the cannabis industry that struggled to survive in 2022 and the pressure is only going to intensify in 2023.
The most significant consolidation intiatives in 2022 were:
The emergence of Impilovest after a mega-merger of Western Cape cannabis brands centred around Afriplex and Releaf,
Labat’s recentering of its cannabis strategy around Sweetwater Aquaponics and Cannafrica, The emergence of more SAHPRA licensees which benefited the likes of Hydrobiz and other service providers,
The emergence of a new Gauteng powerhouse with the province’s Accelerator Project hooking up with newcomer Origi Holdings, the brainchild of former Cilo Cybin Business Development Manager Johann Slabber;
Cannabiz Africa’s outlook for 2023 is that the consolidation wave is set to continue, particularly in the cultivation space. Fewer than 10% of SAHPRA licensees have managed to successfully export their crop, there is said to be widespread dumping of export rejects into the local illegal market, and the first major “For Sale” signs are coming out.
Those businesses with vision and deep pockets will prevail in the year ahead, and sadly a lot of smaller players will be shaken out across all points in the value chain.
However, consolidation is also about market efficiency, and however painful it will be for certain stakeholders in the year ahead, the ultimate result will be a resilient South African cannabis private sector that does not rely on Government promises to be viable.
There will be increased high quality cannabis exports from South Africa from the likes of Felbridge, PharmaGrower, Afriplex, Cilo Cybin, Druid's Garden and Isando exporting product and the rise of offtake agreement specialists like Greg Beadle and Johan Slabber stepping into the intermediary space.