Cannabis South Africa – Africa is about to get its first listing of a medical cannabis-focused Special Purpose Acquisition Company (SPAC). A local South African company, Cilo Cybin Holdings, has received the go-ahead to list on the Johannesburg Stock Exchange (JSE). The company hopes to raise 2 billion Rand ($115m) for the manufacturing of medicinal cannabis in an initial public offer (IPO) that will remain open until November 2022.
The announcement is expected to draw significant attention from investors as South Africa’s nascent cannabis industry is on its way to accessing a highly praised global market that is valued at an estimated $27 billion for the year 2022. With predictions that the industry will reach an impressive net worth of $51 billion by 2025.
Medical Cannabis:
Medical cannabis is used for the treatment of various chronic conditions, such as Parkinson’s disease, Alzheimer’s disease, arthritis, cancer, depression, anxiety, epilepsy, and other neurological conditions.
Securing of funding and the next steps to follow:
SPACs are formed to raise capital through an IPO or to acquire or merge with an existing company. Cilo Cybin’s listing is only the fourth of a SPAC on the continent and the first for a SPAC specialising in cannabis.
According to the founder, Gabriel Theron, once the required funds have been raised, the first step of the plan would be to “acquire an existing cannabis manufacturing facility and to super-size its capacity,” according to Theron, they would like to position themselves as “one of the largest processing hubs for the cannabis industry in Africa.”
Cilo Cybin’s acquisition target is a facility in Pretoria that can produce about 150 million rands worth of cannabis and vaping products a month, said Theron. The plant is one of many entities in South Africa to have been given a license to cultivate or manufacture cannabis products. Acquisitions of companies that test brain health and genetics will then be considered, he said. The company may later attempt to list on the Nasdaq exchange in New York to raise further funds.
If and when the market develops, the company plans to explore manufacturing options for products of psilocybin, the active ingredient of the so called “magic mushrooms” from which the company takes its name.
Current cannabis legislation in South Africa
At present, two pieces of legislation in South Africa regulate the acquisition, use, possession, cultivation, manufacture and sale of cannabis and cannabis products: namely the Drugs and Drugs Trafficking Act 140 of 1992 and the Medicines and Related Substances Act 101 of 1965 (“Medicines Act”).
The primary piece of legislation regulating cannabis and cannabis products is the Medicines Act. When considering the Medicines Act, one needs to separate the components of cannabis and cannabis products as follows:
- cannabidiols (CBD), which are non-psychoactive
- tetrahydrocannabinol (THC), which is psychoactive in nature
- the cannabis plant itself with all its components
South Africa’s medicinal cannabis industry:
In August 2021, the SA Department of Agriculture, Land Reform and Rural Development (DALRR) proposed its Cannabis Master Plan, which “aims to provide a broad framework for the development and growth of the South African Cannabis industry to contribute to economic development, job creation, inclusive participation, rural development and poverty alleviation.”
Prospects for medicinal exports look strong and are at present unburdened by domestic regulations. Safricanna, which owns extensive growing facilities in Gauteng, was awarded a Good Manufacturing Practice certification by the SA Health Products Regulatory Authority in 2021 and complies with the EU’s stringent standards for imported medicinal cannabis.
Trade of Cannabis between South Africa and Europe:
In 2021, South African company, SafriCanna agreed to a 500kg offtake agreement with German firm Demecan for 2023 and plans to further raise $40 million for its production facilities to take annual output to 2500kg by 2024.
In a headline titled “Europe’s Call for Medical Cannabis Sees South Africa Firm Thrive” that was published on 11 September 2022, The blooming demand for medical cannabis has seen a South African producer, SafriCanna, sell all of its outputs for next year in advance.
To meet rising demand, SafriCanna aims to increase production fivefold by 2024. It will spend $40 million on expanding its facilities in Pretoria to produce 25,000 kilograms (55,000 pounds) of cannabis flowers a year from 5,000 kilograms which are currently being produced in 2022.
“The overseas medicinal cannabis marketplace serves as a perfect point of departure for SafriCanna because the market is developed and going from strength to strength”, says the company website.
South African cannabis companies such as Cilo Cybin’s and SafriCanna are both pioneers and front runners in creating a shift towards a future where South African medicinal cannabis is recognised in every corner of the globe.
Sources:
- https://businesstech.co.za/news/business/624213/south-africa-to-get-first-listing-of-a-medical-cannabis-focused-spac/
- https://african.business/2022/09/agribusiness-manufacturing/africas-first-cannabis-spac-listing-shows-way-forward-for-nascent-industry-in-south-africa/
- https://www.mondaq.com/southafrica/cannabis-hemp/1137674/the-cannabis-industry-in-south-africa-how-does-one-enter-the-market
