South Africa’s medical cannabis export-only model is not working. The ill-conceived policy, designed to suit international pharmaceutical companies, is not economically feasible for most of the 110 or so cultivators who have been awarded SAHPRA licenses, and it is certainly beyond the reach of the thousands of traditional growers who remain locked outside the system.
This has emerged from research by Andrew Bowman, Value capture in the emerging medical cannabis global value chain: insights from South Africa, published in the September 2026 edition of the Journal of Illicit Economies. He reports that from 2023 there was already a huge gap between the output of SAHPRA facilities versus the volume actually exported.
INCB picks up the discrepancies between production and actual exports
Bowman quotes International Narcotics Control Board (INCB) figures for 2023 to show that 1,635 kgs of medical cannabis was exported that year, compared to reported production of around 10 000 kgs. That means that over 8 000 kgs was not accounted for, and although there may have been third party destruction of non-exportable stock, interviewees believed most of it found its way onto the local market.
If the 2023 figures indicate 80% of recorded cultivation is being dumped locally, it’s likely that the pattern persists today as there has been no regulatory progress in linking licensed producers to licenced outlets (mainly because there is no such licensing system yet in place).
Bowman interviewed a broad cross-section of local medical cannabis stakeholders and found general agreement that the most significant challenge exporters face is access to the European Union. Gaining certification by the European Medicines Agency (EMA) through the EU-GMP standard, is costly and time-consuming and therefore is a huge barrier to entry. EU medical cannabis distributors are obliged to buy from EU GMP licensed facilities or ones recognized by the EMA – these include Australian and Canadian certifications, but not SAHPRA’s. That’s despite South Africa’s membership of the elite Pharmaceutical Inspection Co-operation Scheme for regulatory harmonization.
‘We believed SAHPRA certification would get us into Europe’
One interviewee who did not want to be named, told Bowman: “We were led to believe … that the South African GMP was equivalent to the EU GMP due to bilateral trade agreements. And what happened was that the EU very quickly said ‘we don’t recognise this GMP’. So whilst we geared ourself up for the South African requirements, we were told by European buyers that ‘sorry, we don’t accept that’. And so we had invested going down particular routes of technologies and purchasing, and certain types of equipment and methodologies that were not compliant, and we believed that they were.”
As another cultivator stated: “When they [new cultivators] started testing their products, they started to see they weren’t passing certain standards. Microbials, mould, heavy metals, you know, those type of things… It’s a GMP standard you have to have them under certain levels. And the problem is because you’re not doing food, you’re doing pharmaceutical, the standards are a lot stricter … and guys weren’t understanding, they’d never failed heavy metals in their life on peppers and grapes, but now they’re growing cannabis and they’re failing heavy metals, but that’s because cannabis is a bio-accumulator so anything that goes into it, it absorbs it in the plant tissue.”
Cultivators are at the mercy of offtakers
Some cultivators are going the route of ‘greenwashing’. They are accessing European markets indirectly, as EU-GMP was “heterogeneously applied” as one consultant interviewed put it. With different member states interpreting EMA guidelines in different ways, it is consequently possible to sell dry flowers under South African GACP licences to EU-GMP licensed ‘contract manufacturers’ in certain countries. Malta and Portugal are favoured destinations where importers have the capacity to repackage and resell elsewhere in the EU.
A common assertion among interviewees from the South African cannabis industry was that some such importers were acting as opportunistic middlemen, achieving value capture by selling largely untransformed products with a large markup.
One cultivator suggested distributors were taking 40–60% of the final sale value simply by “taking it, warehousing it, distributing it, to the pharmacies”, made possible by a lack of competition and by the peculiarities of non-tariff barriers. Such middlemen carry considerable risk, which is arguably offset by the price premium commanded by having an EU GMP stamp on a product.
Bowman says this creates the opportunity for cannabis importers to demand ‘exogenous rents’, achieved not through processes of innovation or control of scarce resources, but through advantageous positioning within regulatory systems. He says this ‘asymmetric ‘institutional power’’ is enabled by the non-recognition of domestic licenses, and the net result is that South African cultivators are forced to occupy lower value functions in the global value chain.
“… So although we are still producing a high quality flower and that makes the grade from a testing certificate of analysis perspective” said one interviewee, “ we don’t have some of the certifications that are required to be able to get into the countries that we want and get the price that we want …We are still able to export, but we’re only able to export in a much lower price bracket and it doesn’t make financial sense.”
Bottom line: supplying the local market makes more sense and cents than export
Therefore there is a clear incentive of supplying the rapidly expanding illegal retail ‘Grey Zone’ that has mushroomed across South Africa. Bowman says that the diversion of exports into the local market stemmed often from desperation, illegal producers using licenses as a cover and others who were believed there was genuine ambiguity around legal grey areas arising from recent cannabis reforms.
Interviewees reported that local prices were often better than export prices and did not have the associated costs and paperwork.
As one cultivator explained, many cultivators were in a situation “with no off-taker, sitting with tonnes of stock…A lot of guys have invested a lot of money. They haven’t seen any returns, and they’re desperate.”
Accompanying this in recent years has been the proliferation of illegal outlets, retailing high THC cannabis despite repeated warnings by SAHPRA and SAPS that such activities are illegal.
Former cannabis advisor to Government, Garth Strachan, warned back in 2024 of the “rapidly-growing crisis of illegality” with the “illicit economy hiding in plain sight”. He said there was a danger of big criminal networks becoming involved and that a regulated adult-use market was the best way to deal with this problem. His advice was not heeded.
SAHPRA licensee ‘dumping’ has effectively closed out legacy growers
This explosion of the Grey Zone has changed the dynamics of the illicit market, effectively displacing the legacy growers who were traditionally the main suppliers. As one expert told Bowman, legacy growers faced insurmountable barriers in trying to produce conventional medical cannabis and that landraces were being marginalized because of their relatively low THC content compared to high powered commercial strains.
As one cultivator working with traditional growers put it, “the black rural growers that have supplied the illegal market in South Africa for hundreds of years are now suffering because no one wants to buy their flower anymore because they’re [consumers] all getting this really high quality flower from licensed facilities.”
Another cultivator stated that “those not able to export are dumping product in the local market, which is just killing everybody … The people from Pondoland no longer have a market. What’s happened now is that the private model has flooded the market through the [cannabis] clubs.
“The guy who would normally go to the corner garage get his weed, is now going to the clubs … and the people with money are able to build these big fancy farms, but the people [traditional growers] who put us on the map globally as a cannabis industry, and who have suffered crop spraying, and health issues, and police harassment, they still can’t grow, they’re criminals.”
#
