Labat has restructured its operations to align its SAHPRA-licensed Eastern Cape cannabis cultivation facility, Sweetwater Aquaponics, with its Cannafrica retail network.  CEO Brian van Rooyen (pictured above with Sweetwaters' Shannon Booth in the background) said in his report accompanying the group’s F2024 Annual Financial Statements, that this vertical integration of the Healthcare businesses had boosted profitability. and he was optimistic about prospects for the coming year.

Labat reported historical losses of R272 million in its annual report but directors are confident it is a going concern, despite its shares being suspended on the JSE.

The JSE-listed company’s Healthcare division owns 100% of CannAfrica and 80% of Sweetwaters, which has pioneered cannabis aquaponic cultivation in Africa, and, under master grower is Shannon Booth is producing some of the purest organic cannabis in the country.

‘Redirecting product has improved profitability’

Van Rooyen emphasized that the Healthcare division is “the core of its business, driving growth through a vertically integrated value chain that spans genetics, cultivation, extraction, retail, and research. By integrating cultivation and extraction into our value chain we ensure the consistent supply of premium cannabis distillates for medical and wellness applications.”

Labat has now positioned Sweetwaters to scale up to meet higher demand as its CannAfrica network expands. As of the end of November 2024 it had 85 retail outlets across the country, up from 13 only 18 months ago, and most of the growth has come in the last six months.

Van Rooyen says “The decision to redirect products previously exported into our own ecosystem has enhanced profitability and supply chain efficiency.”

SAHPRA silent on licensed export facilities and the local market

The question of SAHPRA-licensed export facilities supplying product to the local market has been an open secret in the industry for the past few years. This is a regulatory ‘grey zone’ as SAHPRA licenses are for export only and it has been unable to put together a framework to allow licensed cultivators to supply compliant outlets.

Although the regulator is shy about commenting on cannabis issues, it appears to have given the unofficial nod to licensed facilities supplying registered Section 21 medical cannabis patients. For SAHPRA-licensed facilities to be enabled to provide products to compliant outlets makes regulatory sense and meets consumer demand.

The significance of van Rooyen’s statement about ‘redirecting product’ is that it is the first public admission by a senior cannabis stakeholder of the reality  happening on the ground.

Van Rooyen said “the strong interest in the CannAfrica stores and the ability of Sweetwaters to produce top quality buds, flowers and oil and deal through the entire value chain with its licences, has also led to improving profitability and cash flow.”

Labat says its being ‘pro-active on the regulatory front

Van Rooyen says “Labat has remained proactive in addressing regulatory challenges, particularly concerning the evolving legal framework around cannabis. Following the Constitutional Court ruling and the introduction of the Cannabis for Private Purposes Bill, various interpretations have arisen among regulators such as SAHPRA and local enforcement agencies.”

He says that “despite these complexities, Labat has enhanced its regulatory compliance processes to ensure alignment with existing laws. The recent out-of-court settlement by The Haze Club regarding cannabis distribution underscores the dynamic nature of the regulatory landscape.

“Labat continues to monitor developments closely, adapting its strategies to maintain compliance and safeguard its business interests. Through diligent legal and regulatory efforts, Labat has demonstrated its resilience and commitment to overcoming obstacles, ensuring a stable foundation for future growth.”

Future added-value exports still on the cards

Labat does not rule out Sweetwaters potential role in future exports. In the F2023 statements, released at the same time as the F2024 figures in mid-December 2024, the group says: “Given the demand for high quality medicinal cannabis from Sweetwaters, the plan is to expand grow infrastructure from 2600sqm to 4000sqm in the short to medium term.

“This facility also houses the extraction operations, enabling Sweetwaters to harness the full spectrum of cannabis-derived compounds for various applications. Extensive research and development has been conducted using various extraction techniques to produce high quality distillates”.

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