Immense markets, both domestic for export to Europe, are available if African countries repeal prohibition.
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In the global cannabis landscape, Africa is an overlooked market. This is due to a number of factors, such as the illegality of the plant across the continent and the poor economic conditions that many African countries face.
Africa has the potential to become an enormous cannabis market due to the large population and favorable climate that makes growing weed easier than in neighboring Europe. A new report by Prohibition Partners suggests that by 2023, the African cannabis market could reach $7.1 billion.
The status of cannabis in Africa.
Africa has a long history of growing and consuming cannabis. In most countries on the continent, the plant is illegal, although it remains widely cultivated and consumed, according to Prohibition Partners.
The UN estimates more than 38,000 tonnes of cannabis are produced across Africa each year, which results in a black market worth billions.
Out of 54 countries on the African continent, only three — Lesotho, South Africa and Zimbabwe — permit medical use, while Zambia has legislation allowing medical marijuana that has not been enacted.
No African countries have clear legislation allowing recreational use. In South Africa, recreational use is illegal, but cannabis was decriminalized for private cultivation and consumption.
In Egypt, recreational use is illegal, but tolerated. In, Morocco, the prohibition of medical and recreational use is often unenforced, although it is illegal.
The first and only country in the region that allows legal cultivation is Lesotho, a landlocked, mountainous country that has a favorable climate, abundant water and fertile soil for cannabis growing. In other countries, such as Ghana and Nigeria, cannabis is grown illegally, typically for export.
The market potential.
Legalization could result in a huge market and great export opportunities for businesses that would pay taxes and help enrich the region, according to Prohibition Partners.
In Congo, a 100-kilogram sack of cannabis costs between $96 and $128 — significantly higher than maize, which fetches $54 for the same volume.
Cannabis could also create legal employment opportunities. According to the Morocco Network for Industrial and Medicinal Use of Cannabis cited by Prohibition Partners, the clandestine cannabis industry in the country is valued at $10 billion and employs 800,000 people.
Overall, Prohibition estimates the African cannabis market could be worth $7.1 billion by 2023. The bulk of this value is allocated to the recreational market ($6.3 billion). The medical market estimate is much smaller: about $800 million and around 420,000 patients.
Cannabis companies with African exposure.
Even though cannabis is mostly illegal in Africa, in the few nations where it is legal, some international companies have already established a presence. Lesotho in particular has attracted the attention of foreign investors given the possibility to cultivate cannabis for export.
Last year, Supreme Cannabis Company Inc SPRWF 1.3% invested CA$10 million ($7.45 million) in Medigrow Lesotho, acquiring a 10-percent stake. Another Canadian cannabis company, Aphria Inc. APHA 1.13% went even further and formed a joint venture with South Africa-based Verve Group of Companies. The joint venture CannInvest Africa acquired a stake in licensed producer of medical cannabis extracts in Lesotho Verve Dynamics for CA$4.05 million.
The biggest deal in Lesotho by a foreign company was made by Canopy Growth Corp CGC 0.16%. In May 2018, the company purchased Daddy Cann Lesotho PTY Ltd., which has a license to cultivate, manufacture, supply, hold, import, export and transport cannabis and cannabis resin. The total value of the all-stock deal was around CA$28.8 million at the time.
Tilray Inc. TLRY 1.04% has not invested in cannabis businesses in the region, but it did start exporting medical cannabis products to South Africa last year. Similarly, Nuuvera (acquired by Aphria), signed an agreement to supply 3 tonnes of purified THC and CBD extracts per year to Verve.
This article originally was published by Benzinga, a content partner of Green Entrepreneur.
Author: Alex Oleinic