Prohibition Partners and the ACA Group
The Global Cannabis Report 2022 says there’s been significant investment and growth in the African cannabis market, but unless governments put the right regulatory frameworks in place, they risk losing out on the economic benefits that other countries are enjoying.
The African medical cannabis and industrial hemp industries have seen significant growth and development over the course of 2021 and 2022. Countries such as South Africa, Lesotho, Zimbabwe, Uganda and Malawi have seen an increase in licence issuance, exports and investments in the industry.
South Africa has been the headline driver of growth in Africa, with President Cyril Ramaphosa again highlighting cannabis and hemp as being priority growth sectors for the South African economy at his State of the Nation address in February 2022, stating his goal of creating over 130,000 sustainable cannabis and industrial hemp jobs in South Africa. This follows a similar focus on these industries in his 2019 State of the Nation address.
Other countries such as Zimbabwe and Malawi have shifted gear, with more proactive steps being taken to drive economic growth in the cannabis and industrial hemp industries, mainly focusing on industrial hemp to replace declining tobacco exports.
Although momentum has been encouraging, the pace of progress in Africa has been notably slower than in other legal jurisdictions, potentially jeopardising an opportunity for Africa to establish a leading and sustainable position in the industry. Africa benefits from a favourable growing climate, competitive cultivation input costs and a rich history of traditional cannabis growing communities similar to those in South America. However, South America’s cannabis industry growth significantly outpaces that of Africa.
With Africa, alongside other emerging economies feeling the brunt of the economic impact from COVID-19 and inflation, there is an urgent need for governments to identify and quickly realise those sectors that could help improve the economic outlook across the continent. Medical cannabis and industrial hemp continue to be key focal industries for revived growth.
This is also true of many nations outside of Africa, some of whom will be competing with African countries for a market share of import markets like; Germany, Australia and Israel. In 2021, 17 countries exported to Germany and over the past few years around 11 markets have successfully made shipments to Israel.
The likes of South Africa, Lesotho and Uganda are amongst these exporters, and they are competing with regions such as Colombia, Uruguay and Mediterranean countries who are also offering low-cost medical cannabis.
This highlights the need for considered market entry strategies, public private partnerships, accommodative legislation and brand differentiation from African operators, in order to compete.
Southern Africa continues to be the centre of cannabis and industrial hemp activity in Africa, with Lesotho, Zimbabwe and South Africa being the major hubs of industry development on the continent.
Due to South Africa having a mature over-the-counter cannabidiol (CBD) market since 2019, South Africa is the largest domestic market in Africa by value.
Unlike other legal cannabis jurisdictions, Africa has very few registered medical cannabis patients. South Africa is the largest patient market, estimated to have less than 1,000 registered patients. Other African countries that have legalised the domestic use of cannabis for medicinal purposes include, Zimbabwe and Rwanda. However, further work still needs to be done to finalise domestic frameworks for medical cannabis patients for these countries to begin actively prescribing cannabis.
Most African countries such as Zambia, Malawi, Lesotho, Uganda, Ghana and Morocco have legalised medical cannabis for exports only, limiting the potential of the sector to support domestic healthcare needs and commercial opportunities for domestic producers.
It is the position of ACA Group and Prohibition Partners that African governments should consider opening up the market to domestic patients, both for the potential health benefits to citizens and also for the economic benefits to operators.
The African cannabis industry is still small in size relative to other geographies such as; North America, South America, Europe, Israel and Australia. Africa currently has 11 countries that have legalised medical cannabis in some form, mainly for export only. These include; Lesotho, Eswatini, Zimbabwe, South Africa.
Lesotho based MG Health, in partnership with Drapalin Pharmaceuticals GmbH, became the first African licensed producer to be granted European Union - good manufacturing practice (EU-GMP) certification in April 2021. This was an important milestone that signalled Africa’s ability to establish licensed producers that adhere to the highest international standards.
Industrial Globus, a joint venture between Uganda’s Industrial Hemp Uganda Ltd. and Israel’s Together Pharma, partnered with Cantourage to export the first commercial cannabis shipment from Uganda to Germany, moving 50 kilograms of product into Europe’s largest medical cannabis market in December 2021. They’ve also recently shipped cannabis to the UK. This follows a number of successful commercial shipments to Israel in recent years.
Zimbabwe and Rwanda have legalised the domestic use of medical cannabis. Alongside South Africa’s special access scheme (SAS), we are beginning to see the emergence of domestic medical cannabis patients in Africa. However, patient numbers in South Africa are still low, estimated to be less than 1,000 registered medical cannabis patients.
South Africa introduced commercial hemp cultivation permits for the first time, setting in motion the local industrial hemp industry. The first permits were issued in April 2022. Local industry experts advise that over 300 hemp permits have been issued at the time of publication. This follows Zimbabwe and Malawi, both early movers in establishing industrial hemp regulations, with a focus on hemp to replace declining tobacco exports.
Summary of Progress in 2021 and 2022.
South Africa’s government hired its first cannabis specialist advisor to the Presidency, to help structure the Cannabis Master Plan which seeks to fully legalise cannabis in South Africa in the coming years.
The largest African cannabis merger transaction was concluded with South African CBD company, Goodleaf and Lesotho based Highlands Investments (formerly Canopy Growth Africa) merging to form the largest African cannabis company, estimated to be worth US$65 million.
In August 2022, South Africa’s High Court threw out a case that aimed to make cannabis grow clubs legal, dealing a blow to a potential solution to current legislation which limits adult-use commercial activity.
US based Halo Collective spun out its UK and African assets into a new company, Akanda, which listed on the National Association of Securities Dealers Automated Quotations (NASDAQ) in 2022. This was the first cannabis company with significant Africa exposure to list on the NASDAQ Exchange.
One of the largest illicit market suppliers of cannabis in the world, Morocco, legalised cannabis cultivation and sale for the first time. In October 2022, Morocco issued its first cultivation permits. This is a significant milestone for the industry, as Morocco represents the first Islamic state to legalise cannabis, marking a potential turning point for North Africa and Middle Eastern nations to consider legalising cannabis.
African high-tetrahydrocannabinol (THC) flower exports begin to materially scale, with the UK, Australia, Israel and Germany being focal export destinations.