The South African Health Products Regulatory Authority (SAHPRA) proposal, if approved in its current form, will have a far-reaching effect on the cannabis sector, in that BEE compliance will be key to obtaining a cultivation license. 

It also extends the health department’s reach over the agricultural sector and is likely to lead to more administrative red tape for the struggling industry.

However, the proposals are likely to be welcomed by a broad swathe of the cannabis community that argues that formerly disadvantaged individuals should be given a step up in the licensing regime.  

SAHPRA has given the public until 9 September 2024 to comment on the new proposal.

This report below from Moneyweb, published on 11 July 2024, looks at the broader impact of SAHPRA’s new BEE proposal:

After regulators in the financial services and property sector this year announced plans to require broad-based black economic empowerment (B-BBEE) compliance as a prerequisite for licences, government has now turned its attention to healthcare.

SAHPRA, which regulates health products – including manufacturers, wholesalers and distributors – has published a new policy that makes it mandatory for applicants to submit BEE certificates when applying for a licence.

Once this is in place (phase one of the policy), SAHPRA intends to refuse the issuing and/or renewal of licences unless certain BEE levels are reached (phase two). The authority’s draft policy was published last year. In communication this month, SAHPRA has circulated a revised policy and requested submissions from stakeholders before 9 September.

If approved in its current form, the policy will prohibit the supply of health products and medical equipment, including medicines, by players that do not meet B-BBEE requirements. It says it has developed this policy to ensure it aligns itself “to the provisions of Section 10 (1)” of the B-BBEE Act.

SAHPRA’’s authority is wide-reaching, extending to regulating all medicines, biologicals, radiation equipment, and veterinary medicines and medical products – including entities that import and export these.

SAHPRA regulates health products across those for human and animal use. This means the proposed changes could have wide-ranging implications for the broader agricultural sector.

Under the proposed policy, SAHPRA (which is an entity of the Department of Health) will “require an applicant to submit its B-BBEE level certificate when applying for a licence” during the first year of implementation.

It says it will “verify the B-BBEE level status” of applicants and “should an applicant fail to submit its B-BBEE level certificate, or the certificate not be verifiable, SAHPRA will not issue a licence to such applicant”.

It says it will use the information gathered from applicants to “understand the industry structure and health products supply [chain] to inform the development of criteria to be applied”.

Basically, it will determine a threshold level for B-BEEE.

After year one, it will use this criteria to judge whether or not applicants will be granted licences.

Alarm bells

Lobby group Sakeliga argues that “such actions offer an alarming preview of the drastic consequences of an NHI system in which the state would have the entire medical supply chain under its control”.

It contends that it is inevitable that “the addition of BEE requirements – a measure with inherently no relevance for the effective supply of medical products – will lead to declines in the quality, affordability, and availability of medical products”.

“The stifling effect will discourage both local and international operators.”

The group says it will “oppose the draft policy inside and outside the courts” and will make a formal submission to SAHPRA during the comment period.

‘Part of a pattern’

Sakeliga says SAHPRA’s “proposed licensing requirements are part of a larger trend to make economic activity subject to the state’s prior approval, in particular approval based on BEE”.

“The cover-up method followed by SAHPRA, namely a first phase aimed at seemingly innocent BEE reporting to pave the way for a second phase requiring BEE compliance, is part of a pattern that manifests itself in more or less explicit terms also repeated with other regulators.

“We see similar efforts in the financial services industry, the real estate industry, in decisions of the competition commission [sic], the telecommunications industry, the agricultural industry on issues such as water, and more. In addition to all these issues, Sakeliga is already busy developing the legal groundwork and court applications, to which we will now add the proposed BEE licensing of health products.

“Sakeliga warns that the pattern of phasing in is taking hold with regulators in several areas and that businesspeople should be aware that requirements for BEE information collection are not merely benign. Rather, it forms the basis for comprehensive requirements for BEE compliance, with the threat that the state will withdraw its approval for one to do business if not done on the state’s terms.”

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