Nexus Pharma (Pty) Ltd (Nexus) has announced a "groundbreaking" partnership with German cannabis company Enua, to secure a long-term off-take agreement and strengthen ties with South African growers.
This deal comes just weeks after South Africa imposed a ban on the production and sale of cannabis and hemp-derived food products, a decision that has faced heavy criticism from various opposition parties and industry stakeholders.
As part of the agreement, Enua has already "placed a 10-ton order for cannabis biomass through Nexus". Nexus is currently working on bringing two cannabis processing facilities into operation—one located in Gauteng and the other in the Western Cape.
Enua is a vital player in the rapidly growing German medical cannabis market, which is estimated by leading international consultancy Prohibition Partners to be worth €420 million (R8.3 billion) in 2024. The company specialises in connecting cannabis cultivators with its network of pharmacies and has primarily been importing cannabis from Canada to date.
Enua’s managing director and founder Lars Möhring highlighted that Germany was the "biggest cannabis market in the EU and offered significant opportunities for South African exporters".
"Although Germany is encouraging domestic production to meet its needs, that country is looking to promote domestic cultivation, but there is still significant room for imports from South Africa."
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According to Prohibition Partners, imports of medical cannabis in Germany surged by 44% in the second quarter of 2024, reaching a record high of 11,706 kilograms.
Möhring believes the recent German elections are unlikely to derail the rapid growth of the medical cannabis market, which is projected to reach €1 billion (R 20 billion) by 2028.
"The growth has been driven by several factors since cannabis was removed from Germany’s schedule of narcotic drugs a year ago. This has made the handling, distributing, dispensing, and prescription of medical cannabis easier, which in turn has seen a rise in patients accessing prescriptions" he said.
“We are very excited to be offering our services to South African growers as the country is very competitive on price and quality has been improving over the years. Access to the EU could be challenging for outsiders, which was why it was important to develop long-term relationships,"
Meanwhile, Johann Slabber, Nexus Pharma founder and CEO said the relationship was "significant not only for the company and the broader community of cultivators licensed by the South African Health Products Regulatory Authority (SAHPRA), but also as a broader sign of international investor confidence in South Africa"
"The interest by Enua may signal the start of renewed interest in South Africa by the international cannabis investment community, which has so far adopted a ‘wait-and-see’ attitude while the country develops a commercial framework for cannabis and related products."
Slabber noted that while South Africa still has work to do on developing the hemp sector and determining a suitable legal framework for the local adult-use market, the medical cannabis export framework is robust and fit for purpose.
"The international standards and protocols are in place for cultivators who need to raise their standards with a focus on quality and compliance.
"We are offering a route to market for farmers who have been struggling with off-take agreements.
"Because our facilities will be EU GMP certified, we provide a useful stepping stone into Europe, saving farmers the hassle of meeting the high compliance requirements. Nexus is focusing purely on processing, not on cultivation, so we are not competing with the growers we are in business with.
Slabber added that the initial order of 10 tons from Enua will be fulfilled over the next 12 months, helping to reduce the medical cannabis surplus that has accumulated in South Africa over the past three years.
"Although the biomass stockpile is coming down, less than a quarter of the current SAHPRA-licensed cultivators are exporting, which means a significant amount of capital is tied up."
IOL Business