A revamped round of regulations is in the works in Lesotho that would spell out new guidelines for awarding medical cannabis business licenses in the southern African nation, Marijuana Business Daily has learned.
While many of the proposals are more business-friendly than the current rules, some of the draft amendments would effectively erect barriers for prospective industry entrants. Some industry sources say that may help focus regulatory resources on the more serious players.
It is unclear if the proposed regulations would be grandfathered in for existing companies.
MJBizDaily obtained a copy of the draft Drugs of Abuse (Cannabis) Regulations, 2019.
The draft regulations would apply to any individual or company that hopes to carry out business in the cannabis industry or conduct research in Lesotho.
The proposed update looks to implement procedures for tracking the cultivation of cannabis and institute certain criteria, or “control measures,” that the Ministry of Health will consider before granting a license.
The proposed “control measures” would be applicable before new licenses are granted, meaning they would have a greater impact on companies with no cannabis licenses than those with some or all their licenses.
An executive active in the Lesotho medical marijuana industry, granted anonymity to speak freely, said many of the proposed control measures are necessary to avoid illicit activity, but they also put up hurdles for existing players – and even more so for prospective industry entrants who are inexperienced with cannabis operations.
The government has issued roughly five dozen licenses so far.
But few licensees are actually investing in facilities, “so the regulations may be an indirect strategy to limit the number of actual companies that do commence operations as there would simply be too many,” the source said.
According to the proposal, some of the new factors the health minister would consider before granting a license include:
- Whether granting the license is in the public interest.
- The proximity of villages, towns, schools, parks, churches or “public institutions” to the proposed cannabis business if within 5 kilometers (3.1 miles).
- Whether the number of licenses already awarded is adequate to meet demand.
- Access to roads, clean water and electric power, or whether supplying those is part of the business plan.
- The risk of diversion to the illicit market.
- The potential for economic decentralization.
Another executive, Chief Operating Officer Nathan Emery of Precision Cannabis Therapeutics Zimbabwe, pointed out that the “control measures” are highly subjective.
“What does public interest mean?” he asked. “Does this mean the public interest in regards to how it benefits the Basotho people, or with the taxes generated? Will ‘public interest’ be established before or after the fact, and who will design what the public interest is in Lesotho?”
MJBizDaily shared a copy of the draft rules with Emery to get his perspective because of his extensive agribusiness experience in Lesotho.
Emery predicted companies situated in the lowlands would have particular issues with the “proximity” rule.
He also flagged an “economic decentralization” clause.
“This could be the single-most important clause in this draft, if it is left as is, because of the broad definition and understanding of what ‘economic decentralization’ means,” he said.
“Does it mean the government could farm out its obligations to a third party? Does it mean this function would be taken over by a self-governing industry body, semiautonomous? I would definitely want clarification here.”
Also, while medical cannabis cultivation and production would be banned from certain locations, the new control measures would broaden the areas of concern for prospective license applicants to all villages, towns, churches or public institutions within a 5-kilometer radius of the medical cannabis site.
That, coupled with the new consideration for ready access to roads, water and electric power, would be an issue for most prospective entrepreneurs hoping to start from scratch in Lesotho, potentially pushing them farther away from towns where needed infrastructure isn’t established.
May be necessary
Some local executives say it is in the best interest of the government and industry to limit the number of active licensees in Lesotho.
Raising barriers to entry would have two main benefits, they say, including:
- Focusing capital and resources on companies more likely to reach market.
- Allowing for a robust system without stretching regulators too thin.
In Canada, for example, over 400 people are employed by the government to monitor about 200 federal licenses and vet prospective businesses.
Even a robust regulatory regime such as Canada’s has cracks, as demonstrated by the recent CannTrust fiasco, and Lesotho is not in a position to hire hundreds of regulators.
“Lesotho will need to limit the number of active licensees to ensure they have the resources and learnings to be able to effectively and credibly monitor and manage their licensees,” the executive said.
Portions of the proposed regulations could have significant impacts on businesses that are already licensed, because the draft plan does not contain clear language about grandfathering in any or all of the proposals.
“A question raised by the proposed regulations may be whether they grandfather existing licensees,” said another executive who requested anonymity.
The new regulations would increase the qualifications for master growers to a decade of “relevant experience in the cannabis business” – setting the bar so high that candidates in few countries could meet the criteria.
All employees are still required to undergo regular drug testing.
A proposed addition to the regulations would ban businesses from cultivating and manufacturing within 5 kilometers of a school, park, library or alcohol/drug abuse treatment center – a big difference from Canada’s rules, which allow local governments to set their own proximity rules.
That could be an issue for companies already licensed.
Many of the remaining proposals are intended to be improvements on the current regulations.
When manufacturing medical cannabis products, for example, businesses would be required to comply with international Good Manufacturing Practice (GMP) standards.
The prospective operator would also be required to have a quality-assurance employee.
The regulations reorganize the licenses an operator may be granted. The seven licenses are for:
- “Nonacademic” research
- Supply and distribution
Matt Lamers can be reached at [email protected]