The cultivation of medicinal cannabis was legalised in South Africa in 2017 under the “Cultivation of Cannabis and Manufacture of Cannabis and related Pharmaceutical Products for Medical and Research Purposes” an initiative which is stringently governed by the South African Medicines and Related Substances Act of 1965. 

 

The path towards full legalisation in South Africa is however still relatively unclear. Nevertheless, there are no doubts surrounding South Africa’s market potential. There is however a robust and strategic initiative to develop this new commodity class, which is corroborated by the National Strategy for the Industrialisation and Commercialisation of Cannabis; published by the Department of Agriculture, Land Reform and Rural Development. This plan will eventually fully legislate and harness the Cannabis Industry, estimated at R28 billion, as a critical driver of job creation, rural development and foreign investment. 

 

There are however a few hurdles currently preventing the South African cannabis industry from reaching its full potential, which are: 

 

• In order to obtain a license to cultivate medicinal cannabis in South Africa, the South African Health Products Regulatory Authority (“SAHPRA”) requires the prospective cultivator to be in possession of a Letter of Intent ("LOI") from a potential buyer. This poses a challenge for some cultivators as the buying-side of the value-chain prefer to partner with already licensed cultivators. 

 

• Prohibitively high capital costs associated with setting up a Good Manufacturing Process (“GMP”) accredited cultivation facility.

 

• Challenges in matching off take agreement requirements (reaching minimum prescribed quantities) for smaller cultivators. 

 

• South African medicinal cannabis cultivators may only export their products, forcing them to compete with well-established international competitors and markets. 

 

• The South African cannabis market is not yet fully established which provides negligible economies of scale for the cultivators to leverage - e.g. financial resources, access to market information and limited commercialisation expertise.

 

Despite the various challenges the South African cannabis market faces, Aperture Growth identified an opportunity to assist South African licensed and prospective cultivators through the establishment of an Aggregation Supply Model (ASM). The ASM will enable the entire cultivation value-chain via supply consolidation which is linked to an international off take network of trusted partners. 

 

Aperture Growth is in the process of partnering with numerous licensed South African medicinal cannabis cultivators. This coordinated consolidation underpins our sourcing platform and ensures that the cultivators are able to focus on cultivating high quality cannabis (regardless of size) without the underlying concern of distribution and commercialisation challenges. 

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Aperture Growth’s distribution model ensures our international partners are able to sustainably source high quality cannabis, ranked among the most competitive price points globally.