Tuesday, September 27, 2022

South African government “incredibly focused” on cannabis economy—industry view from Highlands

How is the cannabis industry faring in southern Africa, now that the South African government has unveiled its masterplan for the sector? With businesses in South Africa and Lesotho, Mark Corbett, CEO for Goodleaf, and Highlands Investments, offers his views:

“Highland Investments’s cultivation business, Highlands Pure, is located in Lesotho and our consumer brands business, Goodleaf, is headquartered in South Africa.

“In terms of our growing operation, the Lesotho government has taken a progressive stance to cannabis legislation and are very supportive of local cannabis cultivators. The company can grow, import and export high-quality CBD and high-quality THC medicinal cannabis products to other licensed providers, subject to the appropriate regulation in the jurisdiction we are shipping to.

“In terms of the consumer brands business in South Africa, all our products are consistent with SAHPRA (South African Health Products Association) guidelines with a maximum CBD amount of 20mg per serving. In 2018, all CBD-containing preparations were rescheduled and fully legal, confirmed in 2020 in a government gazette notice. While this is significantly lower than international norms, Highlands and Goodleaf are required to follow this. There are significant labelling and packaging requirements which need to be adhered to. 

“While industry is highly-regulated, we embrace this if it is enforced equally and fairly as it ensures all products that come to market are of high standard. A licensing framework was introduced for domestic cultivation and manufacturing of medical cannabis by the department of health in 2017. The South African government is now incredibly focused on building a cannabis economy, and we anticipate the sale of medical cannabis within the next 12 months. On the recreational side, private cultivation and consumption for personal use within the confines of one’s private dwelling is allowed, and we also anticipate this to become more mainstream in the next 24 months. The current evidence shows that progressive cannabis regulation supports the formal economy, and can have real benefit to consumer and patient wellness. The relevant authorities have to work through all the scenarios and implications…and this takes time.

“The African market has multiple opportunities in terms of its unique history and relationship with cannabis, huge consumer opportunity and low-cost growing and manufacturing. We have some of the most well-known global cannabis strains (Durban poison, Malawi gold) and also the average consumption of cannabis is almost double what it is anywhere else. We have 40 million cannabis-users on the continent which is significant. We also have very advanced low-cost production and processing for end-product, as evidenced by our Goodleaf range. The luxury market segment in Africa is also attractive, with Africa having the fastest growing luxury segment in the world, so we are excited about our home-advantage for premium brands like Goodleaf.

“So, what are the biggest challenges facing the cannabis industry in South Africa? The lack of clarity on both the regulatory frameworks and the timing of legalisation makes it challenging for companies to know how, when and where to invest. The regulation surrounding cross-border cannabis is complicated. There are different risk and regulatory requirements for each and every territory in terms of compliance, certification and labelling.

“Because of the amount of capital and expertise required to build a brand and to integrate vertically, to ensure products adhere to very high standards and the internal costs that come with compliance, supply chain management, manufacturing and packaging—it definitely results in some competitors falling away.

“Covid posed a major hurdle. We were focusing on our store roll-out when the pandemic hit, and we had to turn to online sales. This was a blessing as online sales have improved significantly, have a higher net margin, and will continue to grow both in the local and international market.

“The regulatory environment is another challenge. The South African government’s recommended daily dose for CBD—20mg per day—is much lower than other markets. The World Health Organisation, for example, says your body can tolerate up to 800mg a day. With this light dosage, we are not convinced customers enjoy the full benefit.

“We have recently concluded a record-breaking sale of Highlands Pure THC and CBD flower and trim into the European medical cannabis market. The shipment will be despatched in two tranches—the first shipment of just over two tonnes will depart in September. The second shipment of 6.5 tonnes will depart in November. Both will be on charter flights to accommodate the huge load. The shipment travels in bond via road to Johannesburg, and is then scheduled to leave from OR Tambo to Northern Macedonia.

“As an outdoor cultivator, we only plant a single harvest per year. We are preparing now to plant 11Ha of cannabis in October that will be harvested in April 2022. We are also currently extending our range of products and will have a GMP crude, distillate and isolate products available from Q4 this year. 

“Goodleaf merged with Highlands Investments Africa via a share swap last June, with an equivalent value ratio of 65% to 35% respectively. The merger is the largest cannabis deal to date in Africa and makes the combined entity the most valuable cannabis company in Africa with over $50 million already invested to date. The company is poised to take the lead on the African continent and expand into international markets.”

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