Germany is ripe for South African dagga – but growers need to meet strict EU standards

Business Insider SA
(Getty Images)
(Getty Images)
  • South Africa's medicinal cannabis growers are looking to tap into the European market. Germany, as the region's largest and most advanced market, provides a perfect entry point.
  • But exports will need to receive the European Union's Good Manufacturing Practice (GMP) stamp of approval.
  • This entails a lengthy and thorough inspection of production facilities and the product itself.
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Medicinal cannabis growers in South Africa are eyeing exports to Europe, with Germany being the largest and most developed market.

South Africa's cannabis sector is growing, with government keen to commercialise the plant. It's estimated that the industry could be worth R28 billion and support up to 25,000 jobs, according to the Department of Agriculture, Land Reform and Rural Development (DALRRD), tasked with developing the country's Cannabis Master Plan.

And while cannabis culture has rapidly entered South Africa's mainstream since the Constitutional Court's 2018 ruling that decriminalised private and personal use of the plant, commercialisation is still in its infancy.

Amid growth in members-only clubs, a flurry of new products, and listed firms tapping into the cannabis craze, largescale cultivation remains tightly regulated. Getting a permit to grow cannabis for medicinal purposes, granted by the South African Health Products Regulatory Authority (SAHPRA), is a difficult and expensive process.

"The process to obtain a licence from SAHPRA to cultivate cannabis for medical research purposes is a rigorous one," the regulatory body notes on its website.

"There needs to be standardisation of the cannabis cultivars and assurance that crops can be grown in conditions of strict security."

Only a handful of these cultivation permits have been granted by SAHPRA, out of hundreds of applications received. The Cannabis Master Plan hopes to streamline the process to unlock economic potential, a process recently reaffirmed by President Cyril Ramaphosa during his State of the Nation Address.

See also | This Durban light maker is in supermarkets and factories – now it's going for dagga growers

Until then, largescale grow operations remain limited, and those that are able to cultivate don't have a strong market for medicinal cannabis in South Africa. Cannabis growers have looked to export markets with the biggest potential in Europe.

Germany is leading the charge for medicinal cannabis in Europe, with almost 200,000 patients, signalling 10-fold growth over the past five years. Cannabis extract is the fastest growing sector, and Germany's free-market approach, with public reimbursement of cannabis treatment, makes it ideally positioned to receive product from South Africa.

Although demand for cannabis flower has dominated the market, extract-based medical products are expected to quadruple over the next four years, according to Stephen Murphy, CEO of Prohibition Partners. Total sales of both flower and extract across Europe are expected to exceed €2.7 billion in 2025, with Germany holding the lion's share.

"It is still a very early-stage industry and having personal relationships is still really impactful, and it's still largely driven by personal networks [and] that's not something that's going to change anytime soon," said Murphy during a presentation as part of the European Union (EU) Delegation to South Africa, on Wednesday.

And while wooing European producers is vital for entry into the market, receiving the EU's Good manufacturing practice (GMP) stamp of approval, overseen by the European Medicines Agency, is the most important point for South African growers looking to Germany and beyond.

The GMP verifies a product's compliance with certain standards, including confirmation that products are of consistent high quality and appropriate for their intended use.

A grower in neighbouring Lesotho recently received its EU GMP approval, assisted by its partners in Germany. The long process involves a thorough inspection of the production facilities and of the product itself.

"Europe is going to become the biggest market, and the US and Canada, which are the other two big cannabis markets, are not requiring this certification. So South African companies need to focus on getting EU GMP certification because that will put them in pole position to be able to export to Europe," said Murphy.

And while Germany is currently the best option for South Africans with, or in the process of obtaining, SAHPRA permission to grow, other underdeveloped and less competitive markets in Europe hold potential for those just starting out. This includes countries like France, Poland, and Italy described as a "sleeping giant".

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