Labat Africa has set up Highly Creative Consulting which will specialize in helping African countries who want to legalize cannabis with their regulatory frameworks. And Labat Healthcare’s Herschell Maasdorp has warned South African producers to avoid the wine industry dilemma – under-pricing for the international market.
Labat Africa was the first cannabis company to be listed on the JSE and has a dual listing on the Frankfort Stock Exchange and currently has about 18 000 shareholders. It endured the rocky ride of being a mover of first advantage in the cannabis space, and appears to have found solidity with its now-profitable Sweetwater Aquaponics facility at Kenton-on-Sea in the Eastern Cape.
In a recent interview with Farmers Weekly, Labat executives said South Africa’s snail-paced regulatory reform was adding an unnecessary burden on stakeholders.
Labat Healthcare director for business development, Herschel Maasdorp, says changing legislation meant amending several laws for best regulatory reform. Cannabis can be regulated through the Drugs Control Amendment Act or decriminalised through safety and security legislation, amongst others.
“All of these regulations where amendments can be issued on behalf of cannabis will inform the commodity’s commercial trajectory.”
Maasdorp said the absence of a sophisticated policy framework is an indictment of government agencies. “In South Africa, by now, we should have a recommended price per gram of different profiles of cannabis for different markets and purposes. And from the specific price point, each constituent in the value chain should get its share.”
He adds that the new auditing metrics for cannabis could potentially land the industry in the same dilemma as the wine industry, whereby high-quality products are under-priced for the international market. Labat currently sells to dispensaries in Brisbane, Australia, at a locally competitive price per gram, but these sell the prepacked, finished product at a margin as high as 600%.
“Because we’ve developed a repository of intellectual property under a company called The Highly Creative Consulting, we’re now assisting African governments with their legislative framework at policy level,” says Maasdorp.
Thanks to the FSE listing, it is setting up a direct marketing and distribution line into Europe. It plans to launch a pharmaceutical sales, marketing and distribution company in Germany in June this year.
The company has made a number of notable investments in the past 18 months, including the acquisition of a 100% shareholding in Miami-based CBD lifestyle brand Echo Life. It also has the rights to distribute American pre-rolled hemp smokable Ace & Axle for 10 years locally.
In March 2022, Labat acquired Sweetwater Aquaponics (with its working capital requirements), a medicinal cannabis cultivation and processing facility in the Eastern Cape worth R11,5 million. The group is also funding its own biodata observational research into the replacement of opioids for pain management by medicinal cannabis.
Labat’s retail division, operationalised through CannAfrica, was also capitalised in the same period. It has invested more than R20 million of its own cash resources to build a medicinal cannabis value chain.
According to Labat CEO Brian van Rooyen, South Africa needs to urgently address the constraints preventing the country from reaping the fruits of the local industry’s potential.
Van Rooyen says the right framework needs to be enabled as soon as possible so that growers can be involved in every part of the value chain.
“South African businesses can obtain licences to grow, cultivate and export cannabis. All levels of government are saying how much money can be made out of cannabis, but businesses won’t make that money if the legislation isn’t changed.”
The sluggish regulatory process is due to cannabis’s stigma as a narcotic tied to illicit trading.
“Development banks and potential financiers are reluctant to invest in cannabis because of its legacy reputation, and it’s not yet dealt with as a new economic category. They don’t have a clear picture of what the commodity can bring to the economy,” says Van Rooyen.