Lesotho’s Legalized Cannabis Industry Has First-Mover Advantage, Attracts International Investors

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Written by Peter Pedroncelli
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Cultivating cannabis is legal in Lesotho while that is not the case in most of the rest of Africa. African countries are considering the benefits of cannabis legalization to boost their economies. Image – Pexels

In 2017, Lesotho — per capita income: $1,222 — became the first African country to legalize the cultivation, processing and sale of cannabis for medical and scientific purposes.

In doing so, the Lesotho government signaled its intention to grow its cannabis industry into a significant export market, attracting interest from international firms, BBC reports.

The Lesotho Ministry of Health is the licensing authority for cannabis businesses, with applicants vetted through the Lesotho Narcotics Control Board.

However, the cost of starting a cannabis business is prohibitive to local residents. Smallholder farmers cannot afford the $35,300 it costs to obtain a single license, providing big international businesses with an advantage in the market, according to DailyMaverick.

South Africa in the process of legalizing recreational use of cannabis while Zimbabwe legalized growing marijuana for medicinal and research purposes in 2018. Cannabis cultivation is unlawful in most other parts of Africa but the legalization debate is ongoing in Kenya, eSwatini and Uganda.

Lesotho is a mountainous, landlocked country slightly larger than the state of Maryland and is completely surrounded by South Africa.

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It has a population of about 2.2 million, and a per capita GDP of $1,222, according to the World Bank. Lesotho’s national poverty rate was around 49.7 percent in 2017 and it’s classified as a lower-middle-income country. Unemployment is around 24 to 28 percent.

Clothing and diamonds are the country’s main exports, but a legalized cannabis industry has the potential to become a major contributor to the economy and job creation.

A legal cannabis industry could be worth around $90 million to the Lesotho economy by 2023, according to The African Cannabis Report.

Legalized cannabis in Lesotho attracts international firms

In 2017, Lesotho began to offer legal licenses to grow cannabis.

South African firm Verve Dynamics Inc. was granted the first license from the Lesotho Ministry of Health to grow, process, and sell cannabis for medical and scientific purposes, according to the company.

International companies and investors have been attracted to Lesotho by the country’s affordable land, low-cost labor, ideal climate, and an experienced agricultural workforce.

Canadian firms were the first to identify Lesotho’s legalized cannabis industry as an opportunity.

In March 2018, licensed Canadian producer Supreme Cannabis paid $10 million to buy a 10-percent stake in Lesotho’s first legal medical cannabis producer, Medigrow Lesotho.

Other Canadian cannabis firms including Aphria Inc. and Canopy Growth Corp. have also struck deals in Lesotho, according to Financial Post.

British investors have also realized the benefits of partnering with people and companies in Lesotho to import cannabis-related products.

Although cannabidiol products, which are made from cannabis, are legal in the U.K., the extraction of cannabidiol from hemp is prohibited.

This means that investors are unable to invest in cannabidiol production within the U.K., and farmers cannot legally provide hemp for the British cannabidiol industry.

This has been Lesotho’s gain. A deal announced in August saw the launch of British-owned cannabis processing facility Verve Lesotho.

Johannesburg-listed company Labat Group Africa launched Labat Cannabis in September, announcing plans to buy a 70 percent stake in Lesotho cannabis grower and manufacturer Zarenka for around $3.8 million, according to Fin24.

Labat has also acquired a license to cultivate, manufacture, supply, hold, import, export and transport cannabis in Lesotho, BusinessLive reports.