Pharmaceutical company Cilo Cybin, which is planning to list on the JSE early next year, says it will have its cannabis products in stores by November, marking its entry into the booming industry.
CEO and founder Gabriel Theron said this week the company will go to the market with oil and vape products to treat insomnia, inflammation and pain.
The privately owned company has spent the past two years doing research, building its production plant and manufacturing its product after receiving the required regulatory approval to grow, process and package its cannabis offering.
It is the only company in SA with permission to participate in the full cannabis value chain including cultivation, processing, labelling and packaging, says Theron.
The cannabis industry is a fast-growing sector globally with many expansion opportunities. According to a report by New Frontier Data, the global market for cannabis is expected to reach $445.3bn (about R6.6-trillion) in 2025 from $391.3bn, on a compound annual growth rate of 16.6%.
Cannabis products range from edibles to teas and over-the-counter supplements. The cannabis plant contains at least 70 unique compounds, with the two most popular being tetrahydrocannabinol (THC) and cannabidiol (CBD). THC produces psychoactive effects but also has medicinal uses, whereas CBD is a cannabinoid with mostly medicinal properties.
According to the government's draft national cannabis master plan, the use of cannabis as a medicine has not been rigorously researched and tested owing to production and government restrictions, resulting in limited clinical research to define the safety and efficacy of using cannabis to treat diseases.
$400bn
The value of the global cannabis market
Preliminary evidence suggests that cannabis can reduce nausea and vomiting during chemotherapy, improve appetite in people with HIV/Aids, reduce chronic pain and muscle spasms and treat severe forms of epilepsy, says the master plan.
Beside supplements, hemp, which is part of the cannabis plant, can be used to make rope, textiles, clothing, shoes and perfumes.
Cilo Cybin's CBD products for pain and inflammation will be available for sale at Dis-Chem stores, as well as its own online store, which will be launched in the next four to six weeks.
Cilo Cybin will also produce products with the potent THC strain for export to countries such as Brazil and Switzerland as it is illegal to sell products with THC in SA.
The company hopes to raise no less than R500m through its initial public offering on the JSE in the next four to six months, which will be followed by another listing, possibly on Nasdaq six months later, said Theron.
More potent products with THC will be available through prescription by December. The company is in talks with South African doctors who have shown interest in this product for their patients, he said.
According to Theron, any product with less than 600mg of THC per package and less than 20mg per dose is allowed without prescription in SA, but permission from the health regulator must be sought for anything above the recommended dosages,
Although the industry is still in its infancy, the department of trade & industry estimates that it could be worth R28bn.
In SA the illegal market for cannabis with high levels of THC - for recreational or medicinal use - was valued at roughly R33bn in 2020, said Euromonitor research analyst Christopher Day.
The global cannabis market is estimated to be worth $400bn, of which $30bn was from legal products, Theron said.
The government is working on a national cannabis master plan, which if successful, could turn cannabis and hemp production into a "silver bullet for economic growth", said Shaad Vayej, an associate in the dispute-resolution practice at Cliffe Dekker Hofmeyr.
Vayej said the government is "clearly eager to kick-start economic growth in South Africa, and is taking a pragmatic approach in order to achieve this".
The biggest challenge is there is no law allowing for the purchase or sale of high-cannabinoid cannabis or THC to ordinary consumers. "Government needs to maintain the delicate balance between the need to protect its citizenry against potentially harmful substances, and the need to promote legitimate economic activity. However, as it stands, the plan does not offer much in the way of answers. It is broad in approach but short on detail," he said.
One of the key elements of the plan is to commercialise cannabis.
Currently, people are allowed to grow and smoke dagga only at their homes, following a Constitutional Court ruling in 2018. This has provided the impetus for the commercialisation of cannabis.
And with the economy facing sluggish growth and society facing the consequences of Covid-19, the commercialisation of cannabis has a net-positive effect on the country by potentially creating new jobs, the government stated.
Although medical cannabis consumption has been legalised in SA, there have been limited instances of prescriptions being approved, said Euromonitor's Day.
Consumers, through their doctors, need to apply for approval from the South African Health Products Regulatory Authority (Sahpra) for permission to buy medical marijuana.
Though the proposed regulation is a positive move for the industry, there has been criticism about the high costs to enter the market - at least R6m for a Sahpra-compliant facility - making it difficult for small-scale farmers to participate, said Day.
As a result, stakeholders have been lobbying for greater relaxation of existing regulations and the fast-tracking of the legalisation of the adult/recreational use market.
It is estimated that more than 900,000 small-scale farmers are growing cannabis though there are just over 30 companies that have licences for cultivation.
The companies include JSE-listed Labat and Nutritional Holdings, which have made a number of acquisitions in the cannabis industry.
Cilo Cybin has a hi-tech and secure indoor production plant in Centurion, near Pretoria, where it uses systems such as hydroponics and aquaponics to grow cannabis seeds that are used to produce 100kg of cannabis a month. The company employs about 12 people at its facility.
Commenting on the planned listing, Theron, whose background includes running a digital marketing company before spending two years as acting CEO of the state-owned South African Forestry Company, a position he held until the end of 2017, said the company is not listing the cannabis business. It is just one of the products that Cilo Cybin is offering.
Money raised could be used for acquisitions to expand its pharmaceutical and medical related products.
Day said that with the global easing of cannabis regulations, SA is well positioned to become a major supplier to the international market.
"This is because we have centuries of experience in growing cannabis, as it has been used as a traditional medicine. Our climate is also ideal for growing cannabis with high levels of THC, meaning South Africa can supply to other countries which are legalising the recreational use of cannabis."
In future, he said, it will be essential to allow for the recreational use market as greater local demand will allow for a greater supply of cannabis to develop. "This will increase the potential for further job creation and GDP, which the government can then tax and generate further revenue," he said.
Edibles and beverages are expected to become more popular in the future, as they are easier to consume and more approachable for the average consumer, said Day.
But CBD products will likely remain the main attraction for consumers.
There is also the potential for hemp to be used to a greater extent for industrial purposes, such as in construction materials or textiles, but this will depend on whether local producers can scale up existing processing infrastructure.
Theron also expects magic mushrooms to take off. The mushrooms are wild or cultivated and have a chemical called psilocybin, which can be used for antidepressants, post-traumatic stress and anxiety.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.