Akanda Follows Canopy Growth in Exiting Africa as Investor Confidence in the Continent Wanes
Nasdaq-listed Akanda is following in the footsteps of Canopy Growth in abandoning Africa as a cannabis investment destination. The company says it will fulfil its German medical cannabis orders from Portugal rather than try and reverse the unauthorized liquidation of its Lesotho subsidiary, Bophelo Bioscience and Wellness.
Africa has proved to be a graveyard for North American cannabis ambitions.
Canopy Growth had bold plans to establish a low-cost production base in Lesotho and South Africa, and invested billions of dollars in buying Highlands Investments’ licensed operations in 2018. However, it abruptly exited in March 2020 after alcohol conglomerate Constellation Distilleries acquired majority control of Canopy Growth and shifted its strategic focus back to Canada and the US.
Now Nasdaq-listed Akanda is following in its footsteps, having decided to abandon the ‘Battle for Bophelo’ and instead focus on Portugal as its main source of supply for the lucrative German medical cannabis market. The company announced on 16 November 2022 that it would no longer seek a reversal of the unauthorized liquidation of its Lesotho subsidiary, Bophelo Bioscience and Wellness, and instead line up with other creditors to try and claw some of its investment back.
Bophelo was put into liquidation by its founder and former Akanda chair, Louise Mojela, in what Akanda described as the actions of a “rogue director”. The company, which was one of Lesotho’s flagship cannabis companies, is now being wound up after Majola put it into liquidation earlier this year.
This is a major blow for Lesotho’s attractiveness as a cannabis investment destination. The Akanda boardroom blow-out goes beyond corporate governance issues – a simple fact is that Lesotho has not got its quality issues under control and this is leading to reputational damage internationally.
Despite the fact that Lesotho tycoon, Sam Motekane, who’s also a director of Verve Dynamics cannabis company, won the recent presidential elections, the outlook for cannabis growth in the Mountain Kingdom does not look good.
Cannabiz Africa understands that only a handful of licensed operations are exporting flower, and now that Bophelo has gone under, Lesotho may have passed its peak as an African cannbis pioneer. It’s unclear what will become of Bophelo’s assets, but Cannabiz Africa understands that Mojela intends to try and regain control of Bophelo and to resuscitate what was once billed as “potentially the biggest cannabis facility in the world”.
Another sign of disillusion in the Mountain Kingdom is the decision by CloneLabs to pull out of its plan to set up shop in Lesotho. The Western Cape supplier of high-quality cultivation material originally saw a gap as quality issues started affecting Lesotho exports. However, it decided the investment was not worth it because of a dwindling potential client base.
The major cannabis company still operating in Lesotho is Highlands Investments, which merged with Goodleaf last year. Highlands has been supplying North Macedonia with raw flower but has indicted it seeks to rather export AVI’s (added value ingredients) for the pharmaceutical industry rather than biomass.
Akanda’s CEO Tej Virk said that despite the loss of one of Akanda’s key facilities, his company is continuing on its path to ‘operational profitability’.
He told BusinessCann that “The Company has been forced into a position to exit Lesotho due to the unauthorised liquidation of Bophelo”
“However, having a presence in Africa was always about building for the long term and making a social impact on Lesotho’s communities. Fortuitously, we have seen higher demand from German buyers for products produced in Portugal over Lesotho due to quality and evolving EU cannabis import regulations. As such, Akanda is proving that it can more than offset this African cultivation operation with its Portuguese operation to meet German demand.”