Likely Developments in the Year Ahead

Grey Zone Expected to Continue Growing Rapidly

The cannabis retail ‘grey zone’ experienced a boom last year despite the fact that it is illegal to sell cannabis. This trend is likely to continue into 2025 with the scramble for prime retail locations in the metros and online market share continuing to run ahead of the law.

This sector will continue to be a ‘rock’n roll’ ride generating billions of rand as consumers are faced with the most varied and convenient choices they’ve ever had on buying cannabis and related products.

The relationship between the ‘grey zone’, in all its multifacets, and the authorities, will continue to be one of animosity and accommodation, depending on the circumstances. 

The NPA has indicated that it’s not after cannabis consumers but after retailers, so 2025 promises to be a great year for users who have increasing access to improved cannabis products, better quality and consistency and safer shopping environments.

More Small Businesses will be Nurtured

In terms of small business, the CSIR incubated over 20 cannabis small enterprises last year and has several more in the pipeline this year. This has triggered a new wave of ‘township businesses’ ramping up into viable cannabis economic enterprises, particularly in cosmetics, oils and other value added (think hemp beer).  Other government departments such as Small Business, the Gauteng Accelerator Programme have budget for cannabis projects in the year ahead.

There are likely to be a host of new small cannabis businesses in the year ahead, many relying on the ‘grey zone’ to establish their first market footprints.  Cheeba’s Higher Certificate in Cannabis will be on offer in 2025, which will provide a qualification benchmark that is internationally recognized.

Cheeba has also launched a skills and entrepreneur project in Mthatha with the Township Cannabis Incubator.

Cultivators Likely to Continue Facing Consolidation

There is likely to be further consolidation in the formal cannabis economy in the year ahead with many SAHPRA-licensed farmers facing a make-or-break year. Over 70% of the 100+ cultivation licensees are believed to be struggling with exports) and many facilities are likely to come up for sale or be incorporated into bigger operations in the year ahead.  

Many licensed ‘formal’ growers are supplying cannabis to the ‘grey zone’ market because of export difficulties and this is likely to continue with the possibility that SAHPRA may take action.

There is likely to be a slow-down in the application for cultivation licenses as opportunities open up elsewhere in the cannabis value chain.

New Supply Chains to Develop Further

Heavy-hitters like Labat and Pharmagrow have developed legitimate domestic supply chains despite the restrictive regulatory environment. For Labat the year ahead is crucial as it tries to claw back its historic losses of R272 million at the same time as supporting its rapidly growing retail footprint through the Cannafrica brand. 

Players to watch in the year ahead are Nexus, which is investing in processing facilities in Gauteng and the Western Cape and is scaling up to handle huge volumes of biomass and Cilo Cybin which has a war chest going into the new year and its sophisticated Midrand facility lined up for increased demand.

Afriplex, part of the Impilovest group, remains at the forefront of business advancement in the technical space. It’s moved beyond cannabis into the chemical transformation of cannabinoids for use in other fields (eg accelerating the manufacture of polymers) and is developing an export market in the Far East.

There are no formal statistics available on South Africa’s cannabis exports, but local flower is increasingly available to medical cannabis patients in Germany, the UK and Australia.

E Cape, Gauteng, KZN and W Cape will Dominate the Provincial Plays:

Big players likely to make a difference in the provinces are Medigrow, which has entered into a billion rand partnership with the Eastern Cape government to develop an integrated cannabis hub at Coega,

Gauteng is becoming a cannabis centre with limited support from government, which is developing a West Rand cannabis hub. The focus is more on Midrand where Cilo Cybin, Safricanna and Nexus have invested heavily.

KZN has a pilot cannabis project that is starting to bear fruit in the Okhahlamba in the Drakensberg and has plans for cannabis hubs in Vryheid and Illembe.

Wesgro is understood to have facilitated the development of at least two major cannabis facilities in the Western Cape in the last year which will come on stream this year.

Cannabis Investment Will Open Up

Specialist cannabis investors Silverleaf hope there will be more investment options opening up in 2025 as the regulatory environment to date has not been conducive for start-ups.  Once cannabis is dropped from the Drugs Act, the way will be cleared for further foreign and domestic mainstream investment in the local market. To date the slow pace of reform has dampened the international investment community’s interest in South African cannabis, but this is expected to perk up in the year ahead. On the local market, FNB and Nedbank are understood to be considering cannabis project financing.

Private Clubs Set to Continue Growth

The South African private cannabis club movement is likely to expand considerably in 2025 with a more favourable legal climate emerging. Although there is no clarity on the status of private cannabis clubs, authorities appear to recognize the legitimacy of the model and have diverted their attentions elsewhere. GrowOneAfrica and Harambe Solutions have developed compliant systems for private cannabis clubs and have made headway in breaking down the stigma of the movement. There are probably over 100 private cannabis clubs operating in the country with varying degrees of compliance, with perhaps over 30 000 members who have convenient private access to cannabis without ‘buying’.

Registered Medical Cannabis Patients Likely to Rise Rapidly

Section 21 is likely to be the only way to legitimately buy cannabis in South Africa for the next year at least. Although SAHPRA is concerned that the provision in the Medicines Act is being misused to supply ‘recreational’ instead of ‘medical’ cannabis, it remains in control of who it registers as a medical cannabis patient. It’s unclear how many registered medical cannabis patients there are in SA (probably under 10 000) but this number is likely to grow exponentially in the year ahead as service-providers such as Synergy and Cannabis Clinics work with SAHPRA on agreed guidelines and more responsible players enter this space.

Industrial Cannabis Still Getting Out of the Starting Blocks

The Agriculture department issued over 1 000 hemp permits last year but it’s too early to say what the outcomes of the season will be. Although provincial governments are pledging financial and other support for prospective hemp growers, the sector remains heavily constrained, with limited offtake opportunities.

Although these are likely to grow significantly in the year ahead as more private sector players enter the market, the industrial cannabis sector is hobbled.  Hemp permit applications are an exercise in red tape, the local hemp varietals SAH1 and SAH2 are yet to be approved and despite the anticipated change in acceptable levels of THC to increase to  2% from the current 0,2%.

From a demand perspective, Afrimat continues to lead the way in developing hempcrete and other construction uses for hemp, but until such time Government develops the demand-side of its hemp strategy (eg compulsory incorporation of hemp products in building codes or tenders for hemp uniforms) the value chain remains unlinked.

Although Government is placing great store on creating an industrial hemp economy with visions of transforming Mpumulanga’s coal areas into fields of hemp, it has yet to put critical enablers in place and the year ahead is likely to be much more of the same old.

KZN hemp permit applications close at the end of January 2025.

More momentum on the Cannabis Master Plan

There’s likely to be more momentum on the policy front with Trade, Industry and Competition Minister Parks Tau in charge of the National Cannabis Master Plan. His department is working on a hemp commercialization policy and with the Small Business Development Department will be looking at funding options for cannabis farmers (likely to be ‘blended’ finance as in a mixture of grants and loans, in which the Landbank will be involved).

The first regulatory ‘sandboxes’ are likely to be implemented this year in the Eastern Cape, KwaZulu Natal and Gauteng, to enable cannabis enterprises to incubate in less-restrictive environment.

The Department is expected to call for public input on a cannabis commercialization strategy which will form the basis of a new over-arching new Cannabis Act. This is likely to allow a regulated domestic adult-use market but is probably at least 18 months away from appearing before Parliament.

Tau is also likely to shake-up the National Master Plan Steering Committee to bring in more industry expertise and to make it more functional in looking at regulatory aspects of cannabis reform that have to be overhauled. The Department of Social Welfare is likely to be pulled into the cannabis regulatory process as part of an anticipated review of the country’s National Drug Policy which needs to be amended to include a non-criminal approach to cannabis.

One of the main policy debates in the year ahead will be how to square off cannabis reform with a reduction in social harms, particularly given that cannabis is used in dangerous drug cocktails that are increasingly consumed by the youth.

Legislation in the Pipeline

The Department of Justice is expected to release the long-awaited regulations around cannabis possession, home-grow plant limits and other specifics. Once this is done the Cannabis for Private Purposes Act 2024 is likely to be promulgated into law and cannabis will be removed from the Drugs Act.

Other affected laws that will be amended to accommodate the CfPPA will be the Medicines Act, Plant Breeders Act and the Road Safety Act. A new version of the Traditional Healers Act is also likely to be tabled in which the role of cannabis to be clarified.  The Tobacco Act is also likely to be passed in 2025, which will regulate vapes and e-cigarettes for the first time.

Extent of Cannabis Lawfare Remains to be Seen

The final enactment of the CfPPA into law will have a ripple effect on hundreds of cannabis court cases that are pending and many charges are likely to be withdrawn altogether. However, 2025 is likely to be one of continued lawfare against the state as the Justice Department remains of the opinion that cannabis is a “dangerous dependence-producing drug” and will seek to continue prosecutions for ‘dealing’ under the CfPPA and the Medicines Act.

Although the SA Human Rights Commission is planning a ‘round-table’ discussion with the Justice Department next month to try and bring a halt to cannabis arrests – expect these to continue. One of the barometers as to which way the legal wind is blowing will be what happens to the Trial of the Plant 2.0, which is essentially a response to the continued prosecution of Fields of Green for All activist Myrtle Clarke. If it gets to court it will be the trigger for a new wave of activism to push for further removals of penalties surrounding cannabis cultivation.

The focus of the NPA in the year ahead is likely to be on international cartels moving into the country to establish drug production and distribution systems. Cannabis remains the most trafficked illicit substance in the country and is part of an increasingly complicated local criminal network profiting from human trafficking, resource-stripping and narcotic manufacture and supply. Until such time as there is a legal adult market in South Africa, most revenue generated by cannabis will remain in the hands of the cartels.

Legacy Farmers Will Remain a Problem

Seeds of hope are emerging in provincial initiatives in KwaZulu Natal and the Eastern Cape, whereby legacy cannabis farmers are beginning to be incorporated into the mainstream. A government-backed community cannabis development in Okhahlmaba (Bergville) is going into its third planting season and is expanding to include more traditional growers, and projects in Illembe and Vryheid are likely to come onto the radar in the year ahead.

In the Eastern Cape, Medigrow’s investing in a cannabis hub in the Coega SEZ which in time aims to provide a market for up to 30 000 legacy growers in Mpondoland.

However, these are isolated instances, and for the large part, South Africa’s estimated 700 000 informal cannabis farmers in the Eastern Cape, KwaZulu Natal, Mpumulanga and Limpopo continue to be marginalized in the face of reform. Their status is unlikely to change much in the year ahead as they face continuing stockpiles of cannabis as the consumer market evolves and metro-suppliers move in, as well as continued harassment by police.

The impoverishment of legacy growers is likely to accelerate in the year ahead and will do so until such time as South Africa legally recognizes the domestic cannabis economy.

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