Lesotho has traditionally been known for illicit production of relatively large quantities of cannabis grown in some corners of the mountainous Kingdom to basically supply black market in the neighbouring South Africa.
But it was not until the country became first in Africa to legalise production of medical marijuana that Lesotho – a high-altitude, land-locked and tiny Kingdom – attracted attention of big Canadian companies in the world’s cannabis industry.
This has, however, come amid intense debate over the success of the market in the long run, especially with the looming cannabis glut in Canada.
In a media release dated March 20, 2018, a Canadian publicly traded company, Supreme Cannabis, announced it had entered into a “definitive agreement to complete a USD10 million (M140 million) strategic investments” in Medigrow Lesotho, a licensed producer of cannabis in the country.
Supreme said upon completion of the investment, it will hold an approximate 10 percent ownership interest in Medigrow. The two companies established a global distribution partnership of exportation of medical cannabis oil.
Supreme has further provided on its website that it expects strong global demand to exceed supply for the medical cannabis oil. It believes Lesotho is well suited to produce quality cannabis oil and that its ally, Medigrow, possess the expertise to meet the highest quality standards.
Not long, another Canadian giant, Canopy Growth, has made its way into Lesotho, buying USD29 million (M406 million) stake in the Daddy Cann Lesotho, another licensed producer.
According to Canopy Growth, Lesotho boasts of an ideal humidity and growing conditions for greenhouse cultivation, along with very low operational and resources costs, thus “places spectrum cannabis in a position to produce large quantities of quality cannabis at low costs.”
In May 2018, Aphria, also from Canada, announced that it entered into a series of agreements resulting in it forming a joint venture, Cann Invest Africa Ltd, with South African company, Verve Group of Companies.
As part of this transaction valued at over US$4 million (M56 million) Cann Invest has acquired a stake in Verve Dynamics, a licensed producer of medical cannabis extracts in Lesotho. Cann Invest’s partner in Verve is the Matekane Group of Companies.
All these companies cite Lesotho as a potential for a successful cultivation of quality cannabis due to its high altitude combined with fertile soils untainted by pesticides. Same sentiments are shared by Prime Minister Thomas Thabane.
Thabane said, during the launch of Medikingdom’s Mejametalana plantation in December 2018, that Lesotho was most fortunate because of its favourable climatic conditions.
Medikingdom, which has partnered a Washington based Rhizo Sciences, had in a press statement of December 14, 2017 announced plans to partner Medikingdom and build the US$45 million (M630 million) medical cannabis export facility in Lesotho.
Medikingdom was registered in Lesotho in September 2016 for medical cannabis cultivation and converted to a public company in July 2018. It is first in Africa to have harvested its first crop in 2017, and on March 26, 2018 it exported 10 packages of 850-gram samples to Canada for testing.
Its Chief Executive Officer James Mather has told the MNN Centre for Investigative Journalism that they were investing M800 million in Mejametalana plantation over the next two years.
Speaking at the launch Thabane said for a long time individuals had been producing illegal marijuana “that ends up in markets and indeed used for wrong purposes, without any significant benefits for the country or its citizens.”
The project launch, Thabane said, had come at a critical time in Lesotho’s history “as our health system is overwhelmed by non-communicable diseases such as cancer, diabetes and others.”
However, Nathan Emery, a Global Value Chains consultant, has cautioned that the cannabis market was almost saturated and soon Lesotho may find it difficult to export the product.
Emery told the Centre that “Lesotho is neither special nor privileged in the global cannabis industry. South Africa has exactly the same climate as Lesotho and even a more varied terrain and most of its areas do not have near the cold, and frost Lesotho has, which will either necessitate skipping a growing season in winter or increased costs to control the climate in indoor facilities.”
For Emery, the future of the cannabis industry in Lesotho is best determined through the lenses of supply and demand existing globally, “considering also that these companies export to Canada, the first industrialised nation to legalise recreational cannabis”.
The Centre is aware of international media reports on the possible cannabis glut in Canada.
Grizzle recently reported that “based on government surveys, medical use rates in Canada and legal producer construction plans, we estimate Canada will be oversupplied by at least 850,000 kg (85 percent oversupplied) by the end of 2021. International demand will have to consume the excess or else prices in Canada will quickly fall to as low as $2.50/gram, until enough companies go bankrupt to rebalance the market”.
But Medikingdom and Medigrow have shown no worries about the looming cannabis glut in Canada.
Mather has instead said “the market is emerging in Canada; there are many new markets since it has just legalised medical marijuana. Besides, Canada is only a population of 40 million, we are also targeting European markets. Medikingdom has market not only in Canada, but in Australia and across the world.”
Medigrow, on the other hand, has indicated, contrary to the possible glut reports, that “studies show increasing demand of cannabis over the period, we would rather refrain from speculating about future demand and supply dynamics of the industry, we have full confidence in our research and therefore strategic objectives”.
It adds the global demand for medicinal cannabis presented opportunities into the future “and the company is preparing to exploit the imminent opportunities by acquiring necessary internal capabilities and international accreditations to prepare for the opportunities.”
Lesotho, according to Medigrow, has its own competitive advantages “which make it a worthy competitor in the industry and Medigrow being a Lesotho company will indeed leverage the advantages.”
But for Emery, even the international market that may be available is not enough to safe Lesotho from the effects of the supply glut, “considering that the same Canadian and US companies that have invested in Lesotho are investing in Europe.”
The Central Bank of Lesotho, when contacted for a comment, noted it was yet to familiarise itself with the developments on cannabis production in the country and its impact on the economy.