The DTIC must urgently take regulatory action to level the playing field in South Africa's cannabis industry and prevent the ‘wild west’ situation from spiralling further out of control. This is the plea from Silverleaf Investments, which argues that the current ‘grey zone’ is a significant setback for legitimate companies striving to earn an honest income in the cannabis sector.
Silverleaf Investments Director, Darryl Weisz (pictured above), paints a grim picture of the industry’s current state.
As the leader of South Africa’s first dedicated cannabis investment company, Weisz warns that operating within the legal framework has become a major disadvantage. "If you play by the rules, you are handicapped. It’s as simple as that,” he says.
Weisz has called on the the Department of Trade, Industry, and Competition (DTIC) to step in and prevent cannabis reform from descending into a chaotic and unmanageable process. He argues that without intervention, the industry’s ability to reach its full potential—including job creation and new tax revenue streams frequently highlighted by President Cyril Ramaphosa in three recent State of the Nation Addresses (SONA) —will remain severely hindered.
In the absence of robust regulations, Weisz observes, unscrupulous players have exploited the ‘grey zone’—a burgeoning unregulated cannabis economy that generates billions of rands in non-taxable revenue. Much of this revenue likely flows into criminal networks.
Regulatory Vacuum Creating Challenges
In an exclusive interview on January 9, 2025, Weisz strongly criticized the government’s handling of cannabis regulations, describing the current regulatory vacuum as “unsustainable.”
"The hiatus makes it incredibly difficult, if not impossible, to establish a legitimate cannabis industry in South Africa," he explains.
Weisz highlights several issues plaguing the sector. Licensed growers and law-abiding citizens are being ensnared in legal uncertainties, while illegitimate dealers exploit the regulatory limbo by setting up shop in high-traffic areas with little oversight.
Unregulated Market Meeting Soaring Demand
Consumer demand for cannabis and related products has surged to unprecedented levels, a phenomenon that authorities appear unequipped to address. “It’s a self-fulfilling prophecy,” says Weisz. “If you legalize licensed cannabis growing and private consumption, you must provide adequate outlets for the product.”
According to Weisz, the current supply chain is set up for failure. Licensed growers, he argues, should be supplying medical cannabis licensed dispensaries or pharmacies at the very minimum. Instead, consumers are left with no legal option but the Section 21 prescription scheme—a process he says is cumbersome and unattractive compared to the ease of purchasing cannabis from the numerous illegal outlets that now populate malls and shopping strips.
Since 2018, licensed cannabis growers have collectively invested millions of rands in the industry. Despite this, only a handful of players have managed to export their products successfully, leaving many struggling to stay afloat in a challenging and highly regulated international market. “The bar is continually being raised for exports, making it extremely difficult to consistently supply the export markets,” notes Weisz.
Out of desperation, he suggests, some licensed operators may be diverting their product into the ‘grey zone’ to survive. Meanwhile, consumers, observing the proliferation of retail outlets, often assume that cannabis is fully legalized, exacerbating the situation.
Misled by Promises of Reform
“The industry was misled by the government,” asserts Weisz. Officials repeatedly spoke of imminent regulatory reform over the past four years—pledges that prompted significant investment in the sector. The President, he recalls, has regularly championed cannabis reform in State of the Nation Addresses (SONA), stressing the need to cut red tape and capitalize on the industry's potential. Yet, the government has failed to deliver on its promises.
Weisz highlights one example of how this failure has affected Silverleaf investors. Given the high quality standards required for cannabis exports, investing in specialised cannabis testing laboratory seemed like a great business opportunity. However, only a small portion of licensed growers meet the export standards, significantly limiting the demand for such laboratories—a critical component of a functioning cannabis sector.
Conversely, the ‘grey zone’ has required minimal compliance, driving growth in the unregulated space at the expense of legitimate businesses. “This vital part of the cannabis value chain is under strain because there’s currently little requirement for compliance,” Weisz laments. He contends that the cornerstone of a well-functioning and successful cannabis consumption market has to include properly tested product in properly labelled packaging.
Consumer Safety at Risk
Weisz also warns of the potential risks to consumers due to the lack of mandatory safety and compliance standards for cannabis products in the grey market. "Right now, consumers have no protection and no way of knowing if their cannabis contains potentially harmful substances like heavy metals or pesticides,” he cautions.
The most lucrative part of the cannabis value chain is currently at the consumer-facing retail end, where some players bend the rules to meet demand. Research and development (R&D) licenses, for instance, are often misused to produce cannabis for unregulated retail outlets—a practice Weisz believes undermines the integrity of legitimate research initiatives.
A Call to Action
Weisz calls on the DTIC, which now oversees the Cannabis Master Plan, to fast-track the regulatory process and establish clear guidelines. He stresses the urgency of creating a framework that not only supports legal cannabis businesses but also ensures consumer protection.
“I’m a strong advocate for a well-regulated and inclusive cannabis industry that provides open access to safe, legal products for both medical and recreational users,” says Weisz. “The legislation needs clear criteria and guidelines, particularly for retail consumers, who deserve to know that what they’re consuming is safe.”
Weisz remains hopeful that with swift and decisive action, South Africa can unlock the immense economic and social potential of its cannabis industry while maintaining a safe, equitable, and sustainable marketplace, but warns that the longer the industry remains unregulated, the tougher it will be for law makers and law enforcers to manage it in the best interests of all South Africans.
Says Weisz “the longer it takes to formalise the regulations, the more entrenched this ‘Wild West’ environment becomes – I have seen astonishing growth in non-legal retail outfits and expect that this will continue unabated in the absence of a regulatory framework.”