InterCannAlliance Africa Reveals The Vast Potential Of Africa's Fast-Growing Cannabis Market

New Frontier Data hosted the first InterCannAlliance Africa symposium on May 24 -25, 2019 in Victoria Falls, Zimbabwe.  The first-of-its-kind cannabis conference in Africa, the conference explored the implications of medical cannabis and industrial hemp legalization in Zimbabwe and across the continent. Attendees included governmental leaders from across the continent, and investors and business owners from Europe, Australia, Canada, and other regions.

ICA founding members New Frontier Data, Hoban Law Group, Steep Hill, CohnReznick, Simplifya, theracann International, Mountain Medicine, and Cannvas MedTech each presented key insights from their respective areas of expertise into the opportunities, challenges, and risks that Zimbabwe and other countries in the region will face as they deploy regulated cannabis markets.

Zimbabwe’s Minister of Justice, Legal and Parliamentary Affairs, Hon. Ziyambi Ziyambi, who led the delegation of Zimbabwean government officials in attendance, strongly affirmed his government’s commitment to aggressively implement medical cannabis legalization as a key priority of President Mnangagwa’s development agenda. He also underscored that for Zimbabwe to be successful in launching this new industry, it will need the support of experienced international partners who can help the country navigate the complex global regulatory landscape, raise the capital needed to build production infrastructure, and provide the technical expertise to enable the country’s producers to grow and manufacture the highest quality product possible.

Over two days of presentations, panel discussions and facilitated networking, five themes emerged on the highlight the current state of and potential for cannabis in Africa:

Cannabis legalization is advancing quickly, if quietly, across the continent. Unlike in western markets where there was an intense and protracted public debate about cannabis legalization, the policy discussions in Africa are often happening behind closed doors in the corridors of power. Just three years ago, it would have been hard to imagine cannabis legalization movement sweeping the continent. Yet, in that time countries including Zimbabwe, Lesotho and South Africa have all passed progressive cannabis laws, while nearly another dozen are actively debating or piloting cannabis programs, including the Democratic Republic of Congo, Kenya, Liberia, Malawi, Rwanda, and Uganda. With so many strategically placed countries now exploring medical cannabis and industrial hemp – and approval expected to happen quickly – legalization in the region is poised to grow faster than any other region to date.

Africa has an opportunity to be the world’s low-cost cannabis producer but meeting international exports standards will not be easy. Participating in the emerging global medical cannabis market is a driving factor in the decision to legalize cannabis among many countries in Africa. And with plentiful inexpensive arable land, a large youthful population, and lower average wages, the continent has many foundational elements to be a globally competitive producer.  However, supplying the global market with medical cannabis will also require exporting countries to meet stringent production and quality standards, such as the Good Manufacturing Practices (GMP) standards that are required to import cannabis into Europe. Meeting GMP and equivalent production standards will require significant planning, technical expertise, and rigorous compliance practices to ensure mandated processes are consistently followed. Failure to consistently meet export requirements can be costly, with products being rejected, and the producer liable for the intercontinental shipping costs. But the financial hit could be dwarfed by the reputational damage if the importing countries conclude the risk of substandard quality products is too high and decide to restrict or end imports from a given market or producer. This risk will only grow as the number of countries producing cannabis for export increases.

Establishing a globally competitive industry in Africa will require significant capital, but Investors need to be prepared for the realities of doing business in Africa. With access to cannabis investment capital limited in many African countries, stakeholders will need to raise capital from international markets. However, international investors must understand the challenges and risk of investing in and moving capital through Africa. Not only are the rules governing financial transactions different across markets, but there are also unique challenges associated with inefficient systems, lack of transparency, and corruption. Investors must be especially focused on three areas: ensuring the security of their investment (and locally based assets) through appropriately structured contracts, being clear on their financial obligations under local law (including taxes, and foreign investor rules for local business ownership), and understanding the rules for capital repatriation if they intend to pay out transfer profits out of the country.  These challenges are not insurmountable, but they do introduce significant risks and potentially costly legal challenges that investors must prepare for and mitigate.

Harnessing hemp’s versatility will unlock transformative development opportunities for the continent. Dr. Zorodzai Maroveke, the founder of the Zimbabwe Industrial Hemp Trust, stressed that the potential for cannabis in Africa goes well beyond the plant’s medicinal applications. Industrial hemp can support many of the region’s economic development and sustainable growth priorities, including:

• Addressing food insecurity: Hemp seed, as a superfood, can be used as a nutrient-rich food for both people and livestock in areas facing food insecurity.
• Supporting construction and infrastructure development: As an input to the continent’s infrastructure development (which is forecast to grow to $13 trillion by 2022), hemp can be used to make rope, as a building material strengthener, and for Hempcrete.
• Supporting the transition away from plastics: Countries including Rwanda, South Africa, Kenya, and DRC have banned plastic bags their destructive environmental impact. Hemp-made bags could provide a durable, sustainable alternative.
• Supplementing smallholder income: As a fast-growing crop with wide-ranging uses, hemp is well suited as a rotational crop for smallholder farmers seeing additional sources of revenue or biomass for farm-based uses.

These applications are all deployable with relatively low technology and at low-cost, making them well suited for deployment in rural Africa. And, as the region’s economies grow and both capital and technology access increases,  higher-value applications can be developed, such as bioplastics, biofuels, and processed oils for cosmetic and other nutraceutical applications.

“Demand for CBD products continues to surge across Europe, and many including Canada, which now imports from Colombia to help meet it, are looking to capitalize on it. It will be interesting to see if Africa’s proximity to the old continent and its many agro-based economies may be better positioned to provide a more cost-effective supply,” noted New Frontier Data Founder and CEO Giadha Aguirre de Carcer.  “Not only is hemp a potential low tech, high-profit-margin, new crop to envigorate African economies, but it could also support United Nations’ current Sustainable Development Goals such as fostering regional inclusive economic growth and creating sustainable jobs.”

Indeed, with so many potential uses, the regional opportunity for hemp could dwarf that of the medical cannabis market.

The first movers on the continent will be at a considerable advantage in the race for regional dominance. The convergence of global forces – endorsement of cannabis’ therapeutic efficacy by leading global health bodies, innovative new applications for industrial hemp, surging support for legalization, especially among young adults, and soaring investments into the industry by leading global brands  – are all contributing to the global industry’s explosive growth. With the world’s leading cannabis companies moving quickly to establish strategic partnerships and to secure sources of low-cost supply, the African countries to legalize first will be best positioned to secure those partnerships and funding. For the countries which are slower to embrace legalization, there will still be considerable opportunities to serve their domestic markets, but they will face a more challenging path to becoming regional or globally dominant players.

At the InterCannAlliance Africa Symposium, Africa cast a spotlight on the vast scale of opportunity for legal cannabis in Africa, and the intensity of commitment among the region’s vanguard to build a globally competitive industry. Stakeholders in the global cannabis industry should be following the fast-moving development in Africa closely, for although the continent has been slower to legalize than other regions, it is the next great frontier for legal cannabis. And, if effectively managed, Africa is poised to be a global center for low-cost medical cannabis production and a hub of innovation in industrial hemp.

Image sourced from Pixabay