KwaZulu-Natal start-up Tri-Medi Canna has partnered with UK-listed pharmaceutical company Apollon Formularies to open a cannabis production plant in SA.
Tri-Medi Canna was established to focus on medical cannabis, a booming industry that the company said is forecast to be worth up to $7.1bn (R113.7bn) in Africa by next year, with SA potentially accounting for 70% of that.
The cannabis industry is one of the fastest-growing sectors globally with huge expansion opportunities. Growth is being driven by rapid the increasing global legalisation and recognition of the medical, industrial and recreational uses of cannabis.
To stimulate growth in SA for the market, the government is amending the current restrictive legislation. President Cyril Ramaphosa said in his state of the nation address in February the sector could create 130,000 jobs, though he did not specify over what period.
Tri-Medi Canna’s CEO Bandile Mkhize said this week that, as a start-up, the company wanted to find a partner to assist “achieve our goal of being the medical cannabis company in SA and beyond borders”.
The two companies will establish a joint venture, in which Apollon will hold a 49% stake, to cultivate, process and distribute cannabis-based medicines through a licensing agreement with the UK company.
Mkhize said that the new company would work with emerging farmers and provide training for communities in surrounding areas. He said that the aim was to build a facility that met the EU good manufacturing processes (EU-GMP) standard.
In April last year, Apollan listed on the UK’s Aquis stock exchange, which provides primary and secondary markets for equity and debt products. It has a licence in Jamaica to cultivate, research, process and sell medical cannabis therapeutic cannabis products for various illnesses including prostate and breast cancer.
Stene Jacobs, COO of Apollon Formularies for Europe and Africa, said Apollon had been seeking opportunities to expand its operations internationally so it can make its proprietary medical cannabis formulations for various cancer conditions available to a wider patient base.
He said SA was the first large foreign jurisdiction after Jamaica where Apollon was expanding and it envisaged the local market as a springboard for entry into the rest of southern Africa.
“There is an appetite for what we do. We are already in discussions in Angola,” he said.
Jacobs said the joint venture would include skills transfer and would partner with the University of KwaZulu-Natal and University of Johannesburg to help develop new products.
South Africa has the opportunity to build on its reputation as the regional best-in-class operator and to showcase its already successful cultivation and plant genetics abilities
— Stene Jacobs, COO of Apollon Formularies for Europe and Africa
Apollon will earn royalties for patent formulations and any new drug discovery will be under the joint partnership.
“We spent the last nine years creating formulations. We have four international patents, and will have four more in the next few months,” he said.
In Jamaica it has its own dispensary and treatment centre, which also caters for patients from the UK and US, said Jacobs. He sees SA providing a similar opportunity for medical tourism in the future.
Jacobs said SA should be an epicentre of growing cannabis, given the favourable climate.
“South Africa has the opportunity to build on its reputation as the regional best-in-class operator and to showcase its already successful cultivation and plant genetics abilities,” he said.
Cannabis contains at least 70 unique compounds, with the most popular being tetrahydrocannabinol (THC) and cannabidiol (CBD). THC produces a psychoactive effect and has medicinal and recreational applications, while CBD mostly has medicinal properties.
SA has a long history of cannabis cultivation, particularly in KwaZulu-Natal and the Eastern Cape. There are now an estimated 900,000 small-scale, informal farmers who grown at least 2,500t a year yield.
SA's climate is ideal for the production of cannabis with high levels of THC.
“The country has been cited as one of the top five illicit cannabis producers in the world,” says Euromonitor research analyst Christopher Day. “Conversely, South Africa has relatively poor processing infrastructure, with only two companies retaining a South African Health Products Regulatory Authority (Sahpra)-approved processing licence.”
Most local production is in the form of unprocessed buds, Day notes. “Local production of processed cannabis products continues to be hindered, with the import market servicing the majority of processed cannabis products.”
With the introduction of the cannabis master plan, the government aims to improve the country’s production capacity of seed production, as well as the development of processing plants and storage facilities, says Day.
“To include small-scale farmers, the plan intends to establish training and education programmes, to transfer illicit producers into the formal market.”
A Constitutional Court ruling in 2018 paved the way for limited possession and use of recreational cannabis in private.
Euromonitor says about 40 licences have been awarded for production of high-THC cannabis in SA but only 10 of the producers have operational facilities, due to the high upfront costs in establishing a Sahpra-compliant facility — from R6m to more than R30m.
The product is for export only, due to legislative restrictions on the local cannabis trade.
“Another factor that is preventing further participation of Sahpra-approved manufacturers is the common requirement to have an offtake agreement, where an agreed-upon quality, volume and price is determined before cultivation occurs,” Day says.
“Offtakes have been a challenge to acquire at times (due to growing competition both locally and globally) and have also been known to be cancelled after the agreement was prepared, requiring a licence- holder to generate another offtake agreement in order to be Sahpra compliant,” said Day.
South African cannabis producers that have Sahpra licenses to cultivate and manufacture cannabis include Labat SA, CannaFarm, Afriplex, Cilo Cybin, Hempco.SA, Farma Growers Group, Felbridge and Medi Kingdom.
Cilo Cybin, which plans to list on the JSE in the next few months, has partnered with Arrie Nel Pharmacy Group, which has more than 90 pharmacies in SA, and a number of doctors, to sell products such as CBD oil and vapes that help manage sleep, pain and energy.
JSE-listed Labat has been ramping up its cannabis business through acquisitions and partnerships. The company, which has a dual listing in Frankfurt, secured an offtake agreement with buyers in Switzerland, Germany and Australia.
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