Slowly cannabis is emerging into the mainstream, enabling legitimate businesses to start taking share of market spend away from the illicit market. Those with innovative ideas who do their homework, create the right networks and pursue their goals with passion are more likely to succeed.

This emerged from the Cheeba Africa webinar “Introduction to the cannabis and hemp industries” held on 17 September 2024 where the focus was on challenges and opportunities for entrants into the game.

The panel, hosted by Cheeba’s Linda Siboto, were:

• Kylie Adam CEO and Founder Shanti Natural Care

• Brendan Wood CEO and Founder at Hempsphere

• Thabo Madliwa CEO and Founder at Endalweni Trading

• Vanessa De Sousa Director at Grow One Africa

• Darryl Weisz CEO at Silverleaf Investments

• Ross Hare CEO at Medical Cultivation Exporters of South Africa

South Africa has a naturally good climate for growing cannabis, although to grow it commercially first requires focus on what the end product will be. As has been documented there are over 50 000 uses for the cannabis plant, ranging from hemp products (such as building materials and textiles), medicinal (for a variety of ailments), health and wellness (supplements to induce calm, reduce pain, help sleep), food and beverages (there’s a huge opportunity for animal feeds) and conventional adult-use.

Hempshere's Wood said the first dividing line to cross was to choose between the hemp or cannabis industries. Although they are one species, Cannabis sativa, they are distinguished by their THC levels: ‘hemp’ (the more appropriate terminology is ‘industrial cannabis’) is defined as having a THC level of 0,2% which makes it non-psychoactive.

Hemp is governed by the Department of Agriculture (DALRRD) who issue cultivation permits. Cannabis falls under the Health Department, who’s regulatory body SAHPRA, oversees the issuing of licenses.

Time and Money

Whereas there are relatively low entry costs in getting into the hemp industry (a permit is less than R1 000 and a capital outlay of less than R800 000, depending on the area under cultivation), obtaining a SAHPRA license is a costly affair.

It’s not the license that sets one back (at a cost of around R27 500) it’s the capital required to put up a facility that will meet SAHPRA requirements. Industry experts generally agree that at least R10 million has to be spent on a cannabis facility to ensure minimum compliance, usually more – and that’s before a SAHPRA inspection takes place and a five year license actually issued.

Wood threw out a word of caution regarding payback time.

“A lot of the people don’t realize the length of time it takes to develop a particular strain for a particular product. Each product has to be grown in a particular way. You can’t just say, ‘Oh, I’m going to buy seed from Czechoslovakia’, and all of a sudden it’s going to work under our climatic conditions. It takes five or six years to get your strains perfect, and that’s with intense agricultural practice and some serious science behind it. I believe hemp used to take up to 15 years to produce, but even now, with indoor growing and four harvests a year, it still takes five or six years to get it right”.

Shanti’s Kylie Adams said the cannabis business required several different skills sets: “Entrepreneurship isn’t about just making products, it’s about your financial literacy. Are you investment-ready? Are you tax-compliant? Her advice to newcomers to the game: get your compliance issues sorted out from the get-go to get the foundations right to grow your business.

Current Laws Still Inhibit Mainstream Financing

The current law also inhibits financing of cannabis projects, said Silverleaf’s Weisz said that South Africa was influenced by cannabis reform in the developed world and hoped that the widespread changes happening in the US and EU would prompt local law-makers into enacting cannabis legislation that recognized recreational use. Ultimately, full-adult use cannabis was, in Siboto's words: "the ultimate destination on the horizon"

“Quite frankly, that is the largest part of the market” said. Weisz. " In the last five years in the US where cannabis has been legalized, the formal industry has generated US$20 billion, that’s R400 billion which is a fair whack of our economy”.

He said that the domestic cannabis economy would only take off once there was a regulated commercial framework for cannabis and that would provide a wide range of entrepreneural opportunities.

Weisz said that at until such time as there was broader legalization there were two main areas in South Africa: medicinal and industrial, which had vastly different requirements.

Medical Cultivation Exporters of South Africa's founder’ Ross Hare said medicinal cannabis was not for the faint-hearted but South Africa’s price points meant that there was a lot of potential money to be made out of cultivation and export. 

“It’s expensive and there are a lot of hurdles. Getting into the medical space comes with a level of commitment that the recreational market doesn’t require." 

Hare said his advice to potential exporters was to build long-term partnerships from the beginning

"To be successful in the cannabis industry you have to develop your own networks. It’s impossible to run an operation without a network" he said.

GrowOneAfrica’s de Sousa said that anyone entering the cannabis space now was an industry builder. 

She said GrowOneAfrica assisted private cannabis clubs in compliance and operational procedures, helped with testing and provided a network for entrants into the industry. She said the organization was testing a locally-manufactured decorticator for the hemp industry and hoped to be launching it soon.

Opportunities in Africa and Product Development

So much for the challenges. Where are the opportunities?

“There’s massive interest in Africa in Sadec (Southern African Development Community) with some big developments coming on line” said Wood. “There are some huge facilities being set up at the moment and Africa is going to be a big market for South African cannabis in the future”.

Wood also said there were ‘hemp’ opportunities in the protein industry, horse feed, chicken feed and animal bedding. He said Afrimat’s development of hempcrete bricks was a positive driver, and that now a set of standard operating procedures for the hemp industry to align approaches to cultivation and processing.

Among the local developments underway, said Wood, was that of a hemp ‘e-brick’ containing a rechargeable non-lithium ‘organic’ device to enable walls to double up as power points.

Other new cannabis products coming to market are a hemp beer and an anti-aging cream that’s been developed by Thabo Madliwa CEO and Founder at Endalweni Trading based in the Eastern Cape and a cannabis skin and beauty range produced by Kylie Adam’s Shanti Natural Care, which operates out of Cape Town. Both businesses were incubated by the Township Cannabis Incubator in Mtatha, which helped with product testing and networking with academics and industry associations.

Host Siboto said a huge plus for the industry was that it had the backing of several government agencies “and they are now starting to really roll up their sleeves”.

Watch the webinar on You Tube here

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