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Q&A: Labat poised to cash in on cannabis growth spurt

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Q&A: Labat poised to cash in on cannabis growth spurt

Posted by: admin
Category: Labat Healthcare

The JSE-listed firm is eyeing land in the Eastern Cape and KwaZulu-Natal that would deliver high-grade harvests

The first JSE-listed company to have links to the fast-growing cannabis industry, estimated to be as large as R27bn, Labat Africa has made a number of acquisitions to help it in its new venture. It dumped its fuel interests recently and expects cannabis to make up almost all of its revenue by 2021. Labat Pharmaceuticals CEO Mike Stringer talks to Business Day about the technical aspects of the industry and its plans to expand into the cannabis market.

What regulatory environment does Labat Africa find itself in, and how are you planning to navigate the move into cannabis? 

We have seen an influx of foreign companies into Lesotho, while unfortunately the regulatory aspects of cannabis in SA are lagging behind those of other countries. This could affect our competitive advantage in future.

I believe Southern Africa could become a global hub for cannabis, if it is managed appropriately.

From a regulatory point of view, the September 2018 constitutional [court] ruling has affected the way government thinks and has influenced the politicians to look at the opportunities that cannabis can give the country. This is not only from an economic point of view but also from a decriminalisation point of view. SA’s informal cannabis sector employs almost 1-million people. That’s a huge impact; that’s revenue lost. Once we have legitimised it, I believe we’ll have an improved economy, but we will also be able to use formal labour without fear of arrest. Regulators need to support this endeavour as it has huge potential.

Labat has been venturing into the medical and industrial aspects of the cannabis industry; what does that look like?

Cannabinoids have a huge array of benefits, from pain to sleep management, epilepsy and appetite improvement, especially in HIV-positive people.

From a medical point of view, we plan to be involved in the entire value chain: from planting the seed to extracting and formulating cannabinoids. Initially we’ll sell through the informal route, the health supplements industry, which we are active in already. But our medium-term target is to extract and purify pharmaceutical-grade active ingredients.

Most hemp products available in SA are imported from France and China, when they could just as easily be made locally. The Eastern Cape will have to be the hub for the industrial hemp industry in future.

We’ve got an advantage over the rest of the world in that the largest producers — China, France, Canada and the US — can only plant during summer. We can grow all year round. Our cost of labour is a fraction of that of Europe and America, [and] we have the benefit of a good climate and good land.

Labat has identified a farm in the Eastern Cape on which to grow cannabis. Are there others and has the company identified more areas that may be suitable for production?

I went to see the king and his team in KwaZulu-Natal. The king owns 1.4-million hectares of land and he has a lot of unemployed people. We are in the process of putting a business model together, and are in discussions to try to bring the supporting industry into the farmlands so that the processing can occur nearby.

All the processing needs to happen in the Eastern Cape and KwaZulu-Natal when it comes to cannabis for consumption. [In] areas such as the Northern Cape, where for many decades mining operations have tainted the land with harsh chemicals, rehabilitation is possible, with hemp the best crop in the world for that. In such areas, however, a different crop is likely to be grown: one used not so much for consumption but for industry, in the manufacture of plastics, paper, textiles and so on.

What do the different divisions of Labat aim to do?

The value chain starts with farming, which will be handled by our botanicals division. The idea is to grow high-grade cannabis with large levels of total active cannabinoids for the medicinal industry. Legislation is not as tough on entry to the market as that of actual pharmaceuticals, hence our plans to supply drug makers with raw materials. We will produce complementary medicines available directly to the public, without prescription.

We’ve acquired CannAfrica, which didn’t have the necessary permits and licences to operate previously. We’re in the process of legitimising them, but in the meantime we have plans to open 15 of our own stores by the end of June.

We are also partnering with Canapax, which had 180 stores that were closed down by the Hawks. We are trying to legitimise that business, beginning with 10 stores that sell approved CBD [cannabidiol] products, which contain the recommended dosage of less than 20mg per day. We’ve got a range of 15 products already and hope to do about 50 stores over the next 12 months.

thukwanan@businesslive.co.za

Author: admin

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