Labat Africa, the black-owned investment company which is positioning itself for opportunities in the cannabis industry, has acquired Western Cape-based Ace Genetics.
The deal, worth R1.8m, is the group’s latest move to grow its footprint in the fast-growing cannabis market. Ace Genetics produces raw materials related to cannabis.
The cannabis industry is estimated to be as large as R27bn. The global market for cannabidiol (CBD), one of the chemicals found in cannabis plants, is expected to reach $25bn (R422.6bn) and is growing at a rate of 23.2% per year.
Labat was listed on the JSE 25 years ago and in 2019 became the first company to have links in the cannabis market. It has been gradually expanding its operations in the sector through its health-care arm, Labat Pharmaceuticals.
On Wednesday, the investment holding company said it “requires a dependable and continuous flow of raw materials to ensure it meets the growth in demand over the coming years”. It said Ace Genetics, a cannabis genetics company that “grows its product”, has an established capability to supply the entire Labat grow facility with raw material. Cannabis genetics refers to the study and development of cannabis strains and crop varieties.
Labat said it was pleased to bring in a group of leading experts in the cannabis industry who can help it grow its business and further strengthen SA’s place in the global cannabis market.
Ace Genetics has over 100 strains and sub-strains under cultivation. The company also has a large number of interested customers in the US, Canada and Europe who are wanting to procure the seed and cuttings, Labat said.
Labat, now worth R161m, is just one of a number of JSE-listed counters seeking to grow their presence in SA’s fast-expanding cannabis market. Nutritional Holdings is also seeking to expand its presence in the market.
In November, Nutritional, which has set itself an ambitious target of more than tenfold growth in revenue after acquiring cannabis business Ukusekela, said it has secured a R780m CBD contract in Japan that will make it the first African company to access this market.
Labat is looking to develop more than 100,000m² of land in the Eastern Cape, which is largely seen as the hub for the crop’s cultivation.
It has also started erecting 1,500m² of greenhouses on the Sweetwater cannabis aquaponics facility in the Eastern Cape.
In January, it agreed to buy a 70% interest in a business to be known as CannAfrica which offers education and training programmes and qualifications in primary and secondary agriculture.
Shares in Labat were 2.56% firmer to close at 40c.
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