South Africa’s economy has been battered, with an ever-increasing unemployment rate. However, a light at the end of the tunnel appears to be green.
President Cyril Ramaphosa stated during Thursday night’s State of the Nation Address (SONA) that in an effort to revitalise South Africa’s economy, the government had identified various sectors to stimulate investment and job creation. The highly prized cannabis industry is one of them.
“The hemp and cannabis sector has the potential to create more than 130 000 new jobs. We are therefore streamlining the regulatory processes so that the hemp and cannabis sector can thrive like it is in other countries such as Lesotho,” The President said.
According to Ramaphosa, the government will review the policy and regulatory framework for industrial hemp and cannabis to realise the enormous potential for investment and job creation.
“Our people in the Eastern Cape, KwaZulu-Natal and elsewhere are ready to farm with this age-old commodity and bring it to market in new and innovative forms,” Ramaphosa said.
This is not the first time the government has emphasised the beneficial effects of the cannabis industry on the economy and labour market.
The Newcastillian – Online News reported in August 2021 that the Department of Agriculture, Land Reform, and Rural Development highlighted that the establishment of the cannabis industry would lead to economic diversification. This would be complemented with a ripple effect, seeing an increase in economic growth, job creation, and poverty alleviation.
At the time, the Department said, “The potential size of the cannabis industry in South Africa is estimated at about R 28 billion. It is estimated that it can create between 10 000 to 25 000 jobs across the entire value chain.”
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Because the cannabis industry has enormous potential, two South African companies are leading the way in this field. These are Cilo Cybin and Labat Africa.
Labat Africa, a JSE-listed investment holding company, has listed its shares as a dual listing on the Frankfurt Stock Exchange (FSE). The company was listed on the Johannesburg Stock Exchange (JSE) in 1996, where it repositioned itself and made a strategic shift to become a fully integrated cannabis healthcare company in 2019.
Looking at the company’s listing on the FSE, Brian van Rooyen, chief executive officer of Labat Africa, said the FSE listing is an exciting move for the group, especially given Germany’s new coalition government’s plans to legalise cannabis for medicinal and recreational purposes.
Labat Africa has also received funding from the California-based GR Global Ventures (GRGV). GRGV has committed to investing up to R300 million in cash for equity over the next three years in exchange for new ordinary shares in Labat Africa.
GRGV is also entitled to receive warrants to purchase up to 30 million new Labat Africa ordinary shares at an exercise price of ZAR0.50 per ordinary share, representing a premium of more than 100% over the current Labat Africa trading price.
Looking at the investment, Herschel Maasdorp, Labat Healthcare Group Executive, stated that the funding would allow the company to successfully navigate harsh South African trading conditions and secure a prime position in the growing cannabis sector.
Cilo Cybin is Africa’s first cannabis-focused blank-check company, and it plans to list later this year with the goal of acquiring companies in the fledgling industry, as well as genetics and wearable health-device companies in the United States and South Africa.
In an interview, Gabriel Theron, the founder of South Africa’s Cilo Cybin Pharmaceutical Ltd, said that he hopes to raise at least 500 million Rand.
The entrepreneur plans to use the vehicle to acquire Cilo Cybin, which he values at up to R300 million, followed by non-cannabis health companies in South Africa and the United States.
Theron believes Cilo Cybin cannot be listed directly because it lacks a long enough earnings track record to qualify. Last year, the CEO stated that the company’s initial public offering (IPO) would take place within a year.
Cilo Cybin, named after the psychoactive substance found in magic mushrooms, uses Durban Poison, a strong South African cannabis variety with high levels of tetrahydrocannabinol, or THC, the primary psychoactive chemical found in marijuana plants.
Its non-prescription products will initially be sold by the Arrie Nel Pharmacy Group, which has over 90 locations, while medicines containing THC will need to be recommended by medical professionals to AIDS and cancer patients.
The company is the first in South Africa to be granted permission to grow, process, and package cannabis products. According to Theron, it can also sell the products globally, which increases the value of the licenses.
In terms of his decision to list in Johannesburg, Theron claims that the company knows the investors and has the necessary hype. He also mentioned the possibility of a secondary sale on the Nasdaq.
Theron will own 5% of the SPAC, 20% of which will be sold to the public, and the remainder will be available to asset managers.
With major companies dedicated to the cannabis sector, opening up to investors, and the government looking at enhancing the economy through it, what are your thoughts?
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