Tiny Lesotho looks to become African staging ground for medical marijuana businesses

A landlocked nation in southern Africa is on the cusp of opening major medical cannabis opportunities both domestically and internationally, provided government and businesses overcome near-term obstacles.

The opportunity for Lesotho’s economy to become a supplier of medical cannabis and ancillary services to other countries in Africa where medical cannabis laws are in the works – such as Ghana, South Africa, Zambia, Zimbabwe and Swaziland – is “transformative,” industry officials said.

Being the first country in Africa to regulate medical cannabis has already put Lesotho on the map for international investors.

A little-known law – the 2008 Drugs of Abuse Act – set the stage for the MMJ industry in Lesotho.

But it wasn’t until the last couple of years that businesses started moving into the space.

One such company is Seattle-based Rhizo Sciences, which is a large player in Lesotho through its stake in local licensed producer Medi Kingdom.

Dallas McMillan, Rhizo’s president and co-founder, said Lesotho’s ideal climate, friendly investment environment and ample water, power and skilled workforce make it an attractive location for large-scale cannabis production.

But Nathan Emery, co-founder of Johannesburg-based BioAfrica, an extraction equipment producer, believes Lesotho still has work to do before it becomes a well-oiled market for MMJ businesses.

If it can address the remaining issues, Emery said, Lesotho will be able to act as a staging ground for companies to enter regional markets that offer significantly more potential than the country of 2.2 million people.

“The bigger picture is that South Africa is opening up, and some others,” he said.

New regulations in the works 

Updated regulations are currently being put into a draft bill tentatively named the Drugs of Abuse (Cannabis) Regulations, Marijuana Business Daily has learned.

After the bill is ready, it will be open to public comment and then go to a parliamentary committee. It must then be introduced and approved by the parliament of Lesotho.

There is no timeline.

Industry stakeholders provided input to the Office of the Parliamentary Council, which is responsible for drafting legislation and regulations, at the first-ever stakeholders meeting on Feb. 6.

The following proposals are being considered for the law:

  • A capital adequacy clause would be intended to assure the government that a company has enough capital to undertake the operation it is applying to run.
  • Licenses would be valid for one year, renewable annually.
  • All final products would have to be tested by a certified laboratory before being sold for domestic or export use.

In addition, the government wants companies to have a proven market for their products.

Near-term obstacles 

The unfinished Drugs of Abuse (Cannabis) Regulations will likely have a significant impact on both current and future businesses. But it’s unknown when, or what, will ultimately be in the draft bill when it debuts.

The 2008 Drugs of Abuse Act called for the creation of the Lesotho Narcotics Bureau, but it didn’t launch until January 2018.

The agency will have representation from 10 ministries that will appoint an inspectorate to carry out inspections as per the requirements of the International Narcotics Control Board.

Companies have additional challenges unrelated to the federal government’s slow action.

The Companies Act of Lesotho allows foreigners to own 100% of local businesses, but industry insiders told MJBizDaily that, in reality, local connections are essential to entering the market.

Attracting capital in Lesotho is one of the largest obstacles.

Licenses won’t be granted if companies fail to clearly identify markets for their product.

For any business considering doing business in Lesotho, a strategy on rent-seeking should be part of any due diligence.

Rent-seeking is legal and aims to gain business benefits through political channels, often through subsidies or special regulations.

“Like any developing country with poor civil service salaries and fluid politics, there’s a lot of rent-seeking,” said one source in the country. “You have to decide how you as a company will approach such a dilemma,” said the source, who requested anonymity.

“There has been a lot of instability in government the last few years and as such. Those who look like attractive and connected partners today could be powerless tomorrow, putting your businesses in jeopardy.”

Setting the stage for exports

As the first country in Africa to regulate medical cannabis, Lesotho is hoping to capitalize on its first-mover advantage.

Medi Kingdom is currently growing both hemp and medical cannabis and expects to produce 1,000 kilograms (2,2045 pounds) of medical cannabis per month by the end of 2018, all slated for export.

Verve Dynamics, a licensed producer, aims to start production in the coming weeks and will ultimately grow both hemp and cannabis.

Toronto-based Nuuvera recently signed an off-take agreement with Verve for 3,000 kilograms of purified THC and CBD extract per year.

“Lesotho has a number of international trade agreements that allows it to export its products to jurisdictions worldwide,” Antonio Costanzo, head of international development with Nuuvera, told MJBizDaily.

Eye on domestic cannabis

Some local players also have their eye set on a domestic-use medical marijuana market.

The 2008 Drugs of Abuse Act spells out who can prescribe medical cannabis and under what conditions, but the law lacks enough detail to be workable.

The pending Drugs of Abuse (Cannabis) Regulations may address these technical gaps to facilitate domestic MMJ use.

BioAfrica’s Emery believes Lesotho is ripe for a domestic medical marijuana market.

“Being that 75% or more of Basotho (the people of Lesotho) use some form of traditional medicine and cannabis has been cultivated and used as such for well over a millennium, the government is now considering applicants for this purpose,” he told MJBizDaily.

Emery’s Lesotho-based Sweet Leaf Botanicals is focused on developing opportunities in the domestic market.

“If we look at the numbers alone,” Emery said, “I reckon the local market would easily absorb, within the next five years, upwards of 25 metric tons of cannabis, and this is very conservative.”

He estimates a potential domestic market of 25,000 patients.

Opportunities

The 2008 law provides many opportunities for companies looking to do business in Lesotho.

Lesotho has labs for agricultural, health and natural products, but so far it has no facilities to test MMJ, according to Medi Kingdom CEO James Mather.

Other opportunities also exist up and down the value chain.

There are no input suppliers specifically for cannabis companies, including general infrastructure like irrigation equipment, structural (greenhouse), generators, farming equipment, nutrients and cannabis-specific fertilizers, Medi Kingdom CFO Brian Kuo said.

“Our plan is not to import all these materials, but source locally – generally from South Africa,” he said.

Other possibilities that could exist include:

  • Businesses that gather market data.
  • Consultants to help businesses and government iron out regulations.
  • Opportunities involving educating doctors and patients.

And down the road, medical cannabis tourism targeting South Africans could arise.

Matt Lamers can be reached at [email protected]

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