The Covid 19 pandemic has slowed international investment into the legal southern African economy. That means it’s up to local players to develop the industry. This is a key finding by Birguid Research guide publisher James Maposa, who’s research findings into the subcontinent’s marijuana market can be found here.
Southern African Cannabis earnings down 50% because of Covid-related issues
“Across member states, cannabis industry earnings declined in 2020 due to restricted economic and trade activity. Market revenues are estimated to have dropped by just over 50% between 2019 and 2020 because of the local and global populace prioritising other things including staying healthy and essential good purchases.
“Recreational cannabis which accounts for most of the sub-region’s cannabis sales declined by a CAGR of just over 15% in 2020 but it is the medicinal cannabis segment that recorded the largest demand dip (48% CAGR fall between 2016 and 2020) because of international trade disruptions brought on by the COVID-19 pandemic. Most of the medicinal cannabis grown on the continent is grown for export and shutting of local, regional, and international borders limited what could be traded and thus, impacted revenues earned in 2020.”
International Cannabis Investors Rethinking Southern African Strategies
“Looking inward to grow the continent’s cannabis value chain is paramount. Before the COVID-19 pandemic, investment into the continent’s cannabis industry was happening at great pace. However, since the pandemic, most of the international investors are reconsidering their investments with some either halting, postponing, or cancelling some of their announced continental cannabis related projects. Those that had been rolled out are being executed at a slower pace due to financial constraints. So, the onus now lies on member states to empower locals to develop respective industries through enabling policies and facilitation of downstream sector development”.
All this is easier said than done, says Maposa, because African policymakers fail to take into account the reality that this continent generates billions of dollars in illegal, high-THC, recreational cannabis trade for domestic and international markets.
90% of Africa’s cannabis is for illegal, adult-use market: expect no change soon
Prohibition Partners and Birguid research has shown that 90% of African cannabis revenue comes from illegal sales of adult-use cannabis.
Maposa says: “The medicinal and other use categories account for less than 10% per annum in earnings. Yet, it is the medicinal and other use categories that are being legalised. Only South Africa has legalised cannabis for recreational purposes (private consumption with no permission granted to sell) but the other member states’ stances are currently an absolute no. This has resulted in almost all the industry’s revenues being earned “illegally” with this trend expected to continue up until a sustainable resolve is found.
Simple answer is to legalize and commercialize adult-use consumption
The simple answer says Silverleaf Investment joint CEO Pierre van der Hoven, is for governments to legalize and regulate adult-use cannabis. “Ironically, this is the biggest opportunity to unleash a cannabis economy in SA, but instead of putting this issue at the front of the queue, government has put it at the back. I think we’re at least two years away from unlocking the potential here”.
Big SA cannabis companies taking strain
The latest Birguid research findings give context to the troubles facing South Africa’s two listed cannabis players – Labat and Nutritional Holdings – both of whom are struggling to achieve their forecasts they say, because of Covid-related disruptions to production and distribution supply chains.