Former Standard Bank economist Chris Hart has pioneered a new funding structure for SA cannabis investors and is putting it to the test in a community-driven grow-op in northern KwaZulu Natal.
Hart, chairman of Impact Investment Africa, has created a new share class through a highly tax-efficient structure for Ngoye View Agriculture which has applied to the South African Health Products Regulatory Authority for a cultivation license on the KZN north coast near Richard’s Bay.
Hart: impact investment coupled with 12J is the way to go
SA Cannabis Tax Break | Section 12J a sweetener for mainstream investors interested in cannabis
He is using the new SA cannabis tax break, Section 12J of the Income Tax Act, to put together a sweet deal for investors who would not normally be investing in the cannabis space.
“Investors may well ask the question, why has our investment committee chosen to invest in the medicinal cannabis sector. Firstly, the largest application segment within the global medicinal cannabis market is that for treating chronic pain (44%). The use of medicinal cannabis for the treatment of cancer and to improve sleeping is well known, but great strides have recently been made in effectively treating mental disorders, multiple sclerosis, epilepsy, and muscular dystrophy, to name but a few. This segment of the market is expected to be the fastest growing for years to come.
“Secondly, the goal of becoming the premium quality medicinal cannabis producer and processor has started off very positively. Ngoye View Agriculture Pty Ltd is well positioned to capitalize on its plans for establishing this world class cultivation, testing and R&D facility right here in South Africa”
IIA backing organic cannabis grow op in KZN
Hart’s Impact Investment Africa is backing a new KwaZulu Natal cannabis venture under the leadership of Muhammed Dockrat, Farzana Varachia, and the Kirkland family. He visited the site in August 2020 when the project broke ground and says his local partners “have expertise in hydroponics, medicinal CBD product development and research, engineering, sales procurement, logistics, training and tourism”.
Impact’s Website says:
The medicinal cannabis project is at its core an agricultural project with value chain enhancements. The project entails the establishment of a controlled-environment cannabis growing project on a working farm in KZN. The farming activities include the nursery, the growing/production green houses, the harvesting, drying and extraction activities. The final product will be the cannabis oils, which will be used for the preparation of consumer products.
The offtake potential includes both local and export markets. All activities will be fully compliant with both local and international regulations governing the industry. This implies that the market for medicinal cannabis has substantial growth ahead.
A key barrier to entry is the high capital cost of establishment of a growing facility but the margins and rewards are high.
Phased development aiming for 4 000 square metres grow space
According to the website the Ngoye View Agriculture development is going ahead in two initial phases before expanding into the third:
- Phase 1 – the initial installation of a 2 800 square meter greenhouse consisting of four state-of-art tunnels
- Phase 2 – the CO2 extraction, research and development facilities.
- Phase 3 – expansion of up to 4 hectares of grow area
The specialist grow team has been engaged to source high-yield strains pending a SAHPRA inspection. Impact’s marketing arm has engaged African and wider global consumers, including pharmaceutical companies and retailers.