Overcrowded Africa,s canna market.
“Independent Entity” With Canopy Roots Launches Contract Farming in Lesotho
By Nyasha Bhobo - Special To Cannabis Culture on January 31, 2021
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CANNABIS CULTURE – Highlands Investments (formerly Canopy Africa) has launched Africa´s cannabis contract farming platform called Canna-Tract.
Whether this is canna-colonialism or a secure platform for Africa’s cannabis cultivators has yet to be determined.
Name-changing spree
Canopy Growth, a Canadian cannabis corporation headquartered in Ontario, and formerly called Tweed Marijuana Inc, has now assumed the name Highlands Investments.
Mark Corbett, the managing director of Highlands Investments explained the name-changing spree in an email interview with Cannabis Culture.
“Highlands Investments was formerly Canopy Africa, however it is no longer part of The Canopy Group. In 2017, Canopy Growth exited its operations in South Africa and Lesotho as part of a strategic review of its businesses. This resulted in a transfer of ownership of all of its African operations to Highlands Investments in April 2020,” says Corbett.
Canna-Tract is not yet a registered patent but plans are underway to ring fence the trademark in Lesotho and South Africa. The Canna-Tract grow model is only available in Lesotho, added Corbett, revealing the location of the enterprise.
Hopeful contractees confused?
Farmers and entrepreneurs interested in joining the Canna-Tract program might be unsure where they fit in the arrangement because Highlands Investments specialists (engineers, agronomists) are taking total care of the growing, planting, harvesting. It may sound like clients are merely entrepreneurs working for Highlands with no autonomy on how they want to operate.
Corbett, the managing director clears the mist and states: “Our customers appoint Highlands Investments to grow their genetics on their behalf. They utilize our facilities, staff, certifications and license to generate flower to meet their supply needs.”
Still it´s vexing to really know who owns the the medical cannabis planted– clients or Highlands?
“The plants are owned by our customers, however they are only released to the customer once full payment has been received by Highlands Investments,” says Corbett. Customers appoint Highlands Investments to grow their genetics on their behalf. They utilize the company´s facilities, staff, certifications and license to generate flower to meet their supply needs.
Highland Investments Lesotho facility
Growing without license
In a few African countries where cannabis cultivation has been legalized, licensing is strict and laws are still blurred. For example, in nearby Zimbabwe, growers must first obtain authority from government, cough up $40 000 for ´license fee´, $15 000 per annum ´annual levy´ and a further $5000 if the initiative involves cannabis for scientific research purposes.
Despite this general climate of strict African cannabis-cultivation laws, Highlands Investments says that Canna-Tract enables its growers to work without first obtaining a license.
How then can Highland Investments help growers’ plant without licenses in jurisdictions where licenses are required? “Highland Investments holds a 200Ha Medical Cannabis license in Lesotho,” says Corbett. “Our customers are therefore able to grow their genetics in our facility, using our infrastructure and staff as well as our cannabis license. This means that the cannabis is grown under Highland’s 200Ha license in Lesotho.”
Customers pay for contract
The traditional arrangements with cash-crops contract-farming across Africa, (Usually tea, tobacco or cotton) are that foreign corporations or banks from China or Europe lend money to local farmers. Upon harvest, farmers sell their produce strictly to loan-advancing companies for an agree mark-up price.
But Highlands Investments is taking an opposite approach. It won´t offer advance finance to growers joining its Canna-Tract program. “No,” Corbett confirms. “Customers’ pay for the contract grow services by month with final payment being made once the product is harvested, packed and ready to ship.”
Also in the event of the plants getting spoiled before harvest, growers will soak their own losses. As Corbett says, “we do not insure the crops in the ground.”
Guarding against theft
Cannabis plants and flowers are fragile and vulnerable to weather elements or outright theft by organised crime syndicates. In this regard, Highland Investments will individually each plant to make sure there is electronic tracking of each seed through to final package to ensure integrity, quality and traceability.
Canopy Growth loses billions for investors?
Canopy Growth which gives birth to Highlands Investments is quite a storied corporation. Critics say, Canopy Growth in North America has been a total debacle. It has lost billions of dollars in investor funds. In 2020, the respected stocks publication Motley Fool wondered if Canopy Growth will go bankrupt after its investors were astonished to learn that the pot producer had posted a whopping $1.3 billion net loss for its fourth fiscal quarter. In December 2020, the corporation had to let go 200 workers as a cost cutting measure, its chief executive David Klein, told the Canada Broadcasting corporation.
Somehow the company continues to be bailed out.
“I am not in a position to comment on this,” says Corbett. “What I can say is that Highlands Investments is an independent entity, as of April 2020. It is not part of The Canopy Group.”
Doomed!
CANNABIS CULTURE – Some critics worry this could be an “over-reach.”
Cilo Cybin bills itself as the first firm to win a full cannabis license in South Africa. Their intriguing name reflect the active ingredient in mushrooms that gives one a “magical” feeling.
But with a basketful of plans to exploit Durban Poison, a unique South African cannabis strain; bio-hacking; branding; cultivation; dual IPOs, some critics feel Cilo Cybin is emblematic of the dilemma of South Africa´s cannabis startups: doing too much at once, too fast.
Intriguing name
“We are currently a South African cannabis company in the process of becoming a multinational. We have other entities registered in Panama, and the Netherlands. Our roots started in South Africa, from there we branched out,” Gabriel Theron its chief executive tells Cannabis Culture of their dual intention to do an IPO at home in South Africa, and possibly another one in Luxembourg in Europe in 2022.
Cilo Cybin is the active ingredient in magic mushrooms, and Theron says he picked up this name because they were looking for words or phrases that got something to do with magic to differentiate themselves in the increasingly competitive $1, 9 bn South Africa cannabis market, which could one day become the largest in sub-Saharan Africa.
“Full cannabis license”
Whilst South Africa has largely legalized the cultivation, processing and export of cannabis, the meaning of a “full cannabis license” in South Africa is a bit confusing for would-be investors, especially outsiders.
“You must understand two things about South Africa,” explains Theron. “On one side is an agricultural license that allows you to cultivate cannabis and to export bulky raw material. The second thing is a good manufacturing practice license that allows further process cannabis, flour packaging, oil, a whole range of products.”
This is the meaning of full-cannabis license in the South African context.
He contrasts this with North America particularly the US which he argues, a lot of their cannabis brands are landlocked which means if they produce products from cannabis, they are not allowed to move across state lines or easily go global.
Overstretching themselves?
Buoyed by its “full license” Cilo Cybin wants it all: cultivating Durban Poison, a cannabis strain unique to the Southern African climatic and soil environment; wanting to process it into medicines; exports; partnering with American brands in a way that allows them to be distributors of their products thus assisting them to enter markets like South Africa; planning dual listings on South Africa exchanges and possibly European ones; operating an indoor facility where the environment is controlled, and a processing facility for cannabis where labelling and branding is applied to finished products.
“This is a brilliant full throttle exploitation of the cannabis value chain idea, from farm harvest to shop product, but the weakness is cannabis startups in South Africa are overstretching their abilities,” argues Dennis Juru, president of the Africa Cross boarders Trading Association which lobbies for uniforms cannabis trade rules across countries in the southern part of Africa.
“A major weakness of South Africa´s cannabis startup is they are trying to be everything at once, and too quick: cultivators, cannabis-beer manufacturers, medical-cannabis capsule makers, cannabis chocolate exporters. It tells me the industry is still in confusion and players are not yet sure where the big money along the cannabis value chain. Hence the take-all mentality rather than specialize in one aspect of cannabis.”
But Theron counters that doing a lot at one time is ultimately a wise strategic decision when it comes to South Africa´s cannabis scene because the future of cannabis is not a single outcome. “Our aim is to go all the way because the guys that gonna survive cannabis business in the long run are the brands and not necessarily just the farmers,” Theron says.
Specialist cannabis skills dilemma
As cannabis startups in South Africa adopt hi-tech cultivation methods like the controlled climate indoor facilities, such as Cilo Cybin runs, sourcing highly skilled workers (thermal technicians, agroecologists etc.) will get problematic. According to Reggie Ngcobo, the spokesperson for South Africa’s agriculture minister, South Africa has about 25 000 cannabis workers, but the majority are low-skilled laborers such as leaf pickers and weed packers.
“There´s a rapid interest setting up hi-tech cannabis facilities in South Africa with an eye at supplying Europe´s medical cannabis importers just like nearby Lesotho is doing but finding local specialist skills South African workers and paying them premium salaries is the Achilles heel,” says Carter Mavhiza, an independent public accountant in Johannesburg.
“With all respect I don’t believe our South Africa cannabis startups are at a stage where they can afford to pay competitive salaries for specialist skills.”
Sourcing specialist skills is something Cilo Cybin grapples with too, as it runs an indoor growing facility that produces 220 pounds of cannabis flour a month, 6 harvests per year, controlling light, and humidity as a way to get a refined end product that meets strict EU standards.
“Just like elsewhere globally, cannabis was previously a legally stigmatized industry, this has not been a legal market in the past in South Africa too, and now it´s permitted, and there is a lot of research that needs to go into this,” Theron says.
However, Cheeba Africa, a South Africa cannabis startup, has launched what it calls Cheeba Cannabis Academy, Africa´s first specialist skills school for cannabis training hoping to roll out graduates who have a deep grasp of the medicinal and pharmaceutical side of cannabis processing.
This is a silver lining: “I think (the stigma and skills shortage) it is changing for the better,” sums Theron.
