With the cannabis economy gradually opening up in Africa, leading players to talk about the commercial opportunities as also the consumer and patient wellness it offers. What are the barriers to building something new from the ground up in this space?



BY PETER ENGELBRECHT



HAVING SPENT 25 years working with high-growth startups as a Chartered Accountant, Mark Corbett, the Managing Director of Highlands Investments, found himself working with a cannabis company based in Lesotho, a landlocked kingdom encircled by South Africa.



“I was intrigued by a category that was causing so much disruption across multiple industries including healthcare, consumer brands, tobacco, alcohol, and agriculture. I felt it was a once-in-a-lifetime opportunity to be part of this evolution and play a role in what is essentially the end of another prohibition.



“I am also a very firm advocate for the move away from lifestyle medications like opiates to more sustainable plant-based medicines like cannabis and psilocybin,” Corbett tells FORBES AFRICA.



With a new career in medical cannabis, he has found it to be equally exciting and frustrating. 



“Excitement because of the obvious opportunity to both change the way consumers engage with plant-based medicine and to generate much-needed employment and growth in markets like Africa; frustration because legislation and regulators around the world are moving unbelievably slowly to legalize and formally regulate the industry. This allows the black market to thrive and prevents patients from having access to standardized, regulated and clinically-tested medicines.”



Lesotho began paving the way for the cannabis market in 2017 and was one of the first African countries to grant licenses for the cultivation of cannabis for medical and scientific purposes.



Warren Schewitz, CEO of Goodleaf, a CBD company based in South Africa, says: “We have a license to grow up to 200 hectares at our farm in Kolojane, Lesotho. We currently have the infrastructure to grow 20 hectares of CBD and THC cannabis and target 600kg-700kg of dry flower per hectare.”



In South Africa, cannabis is decriminalized for personal or recreational use within the confines of one’s personal property and has been lowered in its scheduling status from a schedule 7 to a schedule 6 for tetrahydrocannabinol (THC) and schedule 4 for Cannabidiol (CBD). The difference between THC and CBD is that THC is psychoactive which sparks the proverbial “high” when smoked. CBD on the other hand is a non-psychoactive substance that has neuroprotective properties.



Regarding the legal aspects of the cannabis business in South Africa, Schewitz says: “Our cultivation business, Highlands Pure, is located in Lesotho and our consumer brands business, Goodleaf, is headquartered in South Africa. In terms of our growing operation, the Lesotho government has taken a progressive stance to cannabis legislation and is very supportive of local cannabis cultivators&#8230; The government is now incredibly focused on building a cannabis economy and we anticipate the sale of medical cannabis within the next 12 months. On the recreational side, private cultivation and consumption for personal use within the confines of one’s private dwelling are allowed and we also anticipate this to become more mainstream in the next 24 months.



“The current evidence shows that progressive cannabis regulation supports the formal economy and can have real benefit to consumer and patient wellness, the relevant authorities have to work through all the scenarios and implications&#8230;and this takes time.”



Highlands Investments services both the South African CBD wellness market and the global THC and CBD markets, with the bulk of their products destined for the European medical cannabis market.



The medical cannabis industry is still in its early days, especially in Africa, and as with any other medication, in order for you to become a manufacturer, producer, or distributor, one would need to break down the barriers that govern the industry.



“The barriers to entry are extremely high,” says Corbett. “Investors believe that once they have a license, they are good to go. That couldn’t be further from the truth and tens of millions are needed to invest in a fully-fledged certified cultivation business that can service the needs of the medical and wellness markets.



“There are plenty of clinical trials ongoing for cannabis and until they are complete, the number of registered cannabis medicines will remain low. However, in a few years’ time, one would expect to see dozens of registrations being granted in categories like pain and epilepsy and this will lead to a massive industry globally.”



Schewitz predicts the future of the cannabis market in Africa. “The African market has multiple opportunities both in terms of its unique history and relationship with cannabis, huge consumer opportunity and low-cost growth and manufacturing. We have some of the most well-known global cannabis strains (Durban Poison, Malawi Gold) and also the average consumption of cannabis is almost double what it is anywhere else. We have 40 million cannabis users on the continent which is significant.”



Cannabis is also making headway in the battle of opioid addiction.



As the opioid crisis grows and solutions need to be found for chronic pain, companies like the Johannesburg Stock Exchange-listed company, Labat, a player in the world’s cannabis economy, are looking to uncover the opportunity to replace opioids with medical cannabis in the management of chronic pain. Cannabis posits itself a possible solution to the negative side effects of opioids, namely sedation and respiratory depression.



Dr Shiksha Gallow, Medical Director at Biodata, also the Principal Investigator of a study into the potential use of cannabis to treat chronic pain, says research shows cannabis is an effective pain medication and that “the potential is really going to be good”. 



“If we look at South Africa in 2018, we had 17,029 people that had died from an opioid overdose. So although they are effective in pain management, it is also linked to a plethora of side effects and the main side effect being dependence which leads to a possible overdose. On the other hand, if we look at cannabis, it is a very safe medicine and no one has ever overdosed on whole-plant cannabis and the reason is actually scientific because cannabis doesn’t have any brainstem receptors.



When we look at dependency, cannabis is safe because its addiction rate is only 9%, where drugs like opiates are sitting at around 30% addiction rate,” she says. The more people like Dr Gallow conduct research into the medicinal benefits of cannabis, the easier the laws regulating cannabis might become. Only time will tell when the cannabis economy will see its own high on the continent.

Hand holding bottle of Cannabis oil in pipette isolated on white

Weeding Out Challenges in the Cannabis Economy

Ben Kovler’s Green Thumb Industries is expanding its $5.7 billion empires in the Empire State with a lavish new grow facility to compete in the booming marijuana market.



About 60 miles north of Manhattan, at the foothills of the Ramapo Mountains and past a few cow pastures, stands the red brick buildings of the old Mid-Orange Correctional Facility in Warwick, New York. In 2011, then-New York Governor Andrew Cuomo shuttered the prison. Now a decade later, 40 acres of penitentiary farmland is being transformed into the new home of Green Thumb Industries, one of the nation’s largest cannabis companies, and its $150-million cultivation and manufacturing site.



By 2023, GTI’s “cannabis campus” will start producing tens of thousands of pounds of marijuana, millions of THC-infused gummies and vape cartridges to fill the shelves of its dispensaries throughout the Empire State.



Ben Kovler, the 42-year-old CEO and founder of Chicago-based Green Thumb Industries, which grows and sells cannabis, edibles, vaporizers and other products across 14 states and reported $79.3 million in year-over-year EBITDA by the end of the second quarter, is standing in the mud as he presides over the groundbreaking ceremony for his new facility.



“The irony of building a cannabis facility near the grounds of what used to be a federal prison is not lost on us,” Kovler tells a group of union leaders and politicians on a cloudy day in early September. “We understand what happened with the War on Drugs. And we&#8217;re planning to flip that around. Change is really in the air, change is happening in the country, change is happening here. And we&#8217;re able to go from a place where people used to be locked up for marijuana [to one] where we&#8217;re going to employ people and enable opportunity, create wealth and create a positive economic environment.”



<figure class="wp-block-image"><img decoding="async" src="https://specials-images.forbesimg.com/imageserve/614cc41e4467573b00d4e740/GTI--Green-Thumb-Industries--Warwick--Hudson-Valley-Cannabis/0x0.gif?fit=scale" alt="GTI, Green Thumb Industries, Warwick, Hudson Valley Cannabis"/><figcaption>Dig This: Ben Kovler, CEO of Green Thumb Industries, at the groundbreaking of its new 200,000-square-foot cannabis facility on the grounds of a former prison in New York’s Hudson Valley.&nbsp;EVERETT COLLIE</figcaption></figure>



This particular plot of land has been a witness to more than a century of America’s evolving views on drugs and crime. In 1914, it was home to the New York City Farm, an early drug and alcohol treatment center run by Charles Stokes, a former Surgeon General of the United States. In the 1930s, it became the New York State Training School for Boys, a reform school dedicated to rehabilitating troubled youth from the city. By the late 1970s, the property had been converted into a state-run prison. When it closed a decade ago, nearly 400 jobs were lost.



Soon cannabis will rise from its ashes in Warwick. New York’s legal market, which is expected to open adult-use dispensaries in January 2023, is estimated to ring up $3.8 billion of legal sales by 2025 and become the country’s second-largest market after California. At a time when America is ending its prohibition against cannabis state-by-state—18 states now allow adult-use sales, 36 have legalized medical and the $20 billion industry is poised to balloon into a $100 billion juggernaut by the end of the decade—Green Thumb’s facility is an important symbol of the changing times.



<h4 class="wp-block-heading" id="h-"></h4>



<h4 class="wp-block-heading" id="h-where-there-s-smoke">WHERE THERE’S SMOKE</h4>



<h4 class="wp-block-heading" id="h-projected-highs-for-america-s-five-largest-cannabis-markets">Projected highs for America’s five largest cannabis markets.</h4>



<hr class="wp-block-separator"/>



New York is expected to become the second-largest cannabis market in the U.S. by 2025, according to Matt McGinley, an analyst who covers the industry for Needham. Here’s how other budding states are expected to grow.



<div class="wp-block-image"><figure class="aligncenter size-large is-resized"><img loading="lazy" decoding="async" src="https://cms.forbesafrica.com/wp-content/uploads/2021/09/Screenshot-2021-09-27-at-09.32.40-1024x435.png" alt="" class="wp-image-52655" width="614" height="260" srcset="https://cms.forbesafrica.com/wp-content/uploads/2021/09/Screenshot-2021-09-27-at-09.32.40-1024x435.png 1024w, https://cms.forbesafrica.com/wp-content/uploads/2021/09/Screenshot-2021-09-27-at-09.32.40-300x127.png 300w, https://cms.forbesafrica.com/wp-content/uploads/2021/09/Screenshot-2021-09-27-at-09.32.40-768x326.png 768w, https://cms.forbesafrica.com/wp-content/uploads/2021/09/Screenshot-2021-09-27-at-09.32.40.png 1390w" sizes="(max-width: 614px) 100vw, 614px" /></figure></div>



For Michael Sweeton, Warwick’s town supervisor, the groundbreaking on GTI’s cannabis campus—the first phase of which will be a $60 million 200,000-square-foot grow facility—is the culmination of a decade of work. Sweeton fought the closure of the prison because it was an important economic anchor in the farm town. He lost that fight, but he got to work on a new vision—attracting businesses to the sprawling 700-acre site.



Sweeton convinced the state to sell the land to a local nonprofit development corporation, which he set up, and thanks to a loan from a local businessman, it purchased 150 acres for about $4 million. In 2018, the development corporation started selling parcels. Citiva, a subsidiary of New York-based cannabis company iAnthus, bought eight and a half acres for $526,000 and a cannabis testing lab and a CBD products manufacturer have also set up small facilities on the grounds. Then in March, GTI bought its 38-acre parcel for $2.8 million after receiving millions in tax breaks from the town.



“I think it&#8217;s just a home run for us,” says Sweeton, overlooking the pile of dirt he has been trying to develop for the past ten years. “We are a farm community economy—we have a lot of farm tourism, a lot of active farms, but we don&#8217;t really have much of the corporate realm. This is a brave new world.”



Even state officials in Albany are excited about GTI’s new facility, which is slated to have cannabis ready for dispensary shelves in 2023. State Senator Mike Martucci, a Republican who emceed the event, says that the partnership between GTI and Warwick has created a future that he describes as “limitless.”



The construction, which will rollout in three phases, will employ 100 local union laborers. Once complete, the campus will be staffed by more than 150 locals with salaries ranging from $50,000 to $100,000. GTI’s campus will be a model for the entire Hudson Valley, which Martucci hopes becomes a center of commerce for the state’s expanding industry.



<div class="wp-block-image"><figure class="aligncenter is-resized"><img decoding="async" src="https://specials-images.forbesimg.com/imageserve/614cc520db9dde34c3159f71/Warwick-facility-rendering/0x0.gif?fit=scale" alt="Warwick-facility-rendering" width="-2" height="-1"/><figcaption>Empire State Builder: GTI’s new facility will be ready in time to serve New York’s adult-use cannabis market, which is estimated to hit $3.8 billion in sales by 2025.&nbsp;GREEN THUMB INDUSTRIES</figcaption></figure></div>



“Our fertile soil, educated workforce and close proximity to New York City sets us up to be the Silicon Valley for the cannabis industry,” says Martucci.



Pavan Naidu, an aide to New York Governor Kathy Hochul, described GTI’s site as “a pioneering economic engine for Warwick and its surrounding communities.”



Kovler, who founded GTI in 2014 with a few investment partners and launched the company with one dispensary in Mundelein, Illinois, is the first person in his family to get in on the nation’s cannabis green rush. But transforming a business from the illegal market to a legal one is in his blood.



Upon the repeal of Prohibition in the early 1930s, Harry Blum, Kovler’s great-grandfather became president of the Jim Beam Distilling Co. Blum and his father invested in the whiskey maker to revive the American brand. Blum led the company until his son-in-law, Everett Kovler, became president in 1959 and the family sold the company to American Tobacco Co. for an undisclosed sum in the late 1960s.



The riches from whisky made the Kovlers part of Chicago’s elite. Their family name can be found on walls at the city’s zoo, museums, and a library. Ben Kovler’s family office overlooks Chicago from one of the city’s tallest buildings, the John Hancock Center on Michigan Avenue. And his father, Jonathan Kovler, owned a minority stake in the Chicago Bulls in the 1970s and managed the team for 13 years.



One night in 1985, young Ben was sitting next to slam dunk legend Darryl Dawkins when a promising rookie on his dad’s team, Michael Jordan, smashed into him. At the end of the game, Jordan gave Kovler his shoes—one of the first pairs of the Nike Air Jordans. For a while, the size 12.5 sneakers acted as a doorstop in Kovler’s room.



“I got exposure to [Jordan’s] winning attitude, his work ethic,” Kovler says of MJ’s influence. “Seeing the best player, first at practice, hardest to work. Don’t leave until you win.”



In 2013, almost a decade before Kovler would expand his 3,300-employee cannabis company to a small town in New York’s Hudson Valley, he was working for his family office managing its investments and running a nonprofit he founded. Two years after Illinois legalized medical marijuana in 2013, Kovler and a small team won a license, raised $20 million, and got to work building out GTI.



<hr class="wp-block-separator"/>



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“The irony of building a cannabis facility near the grounds of what used to be a federal prison is not lost on us.”—Ben Kovler, CEO and founder of Green Thumb Industries</blockquote>



<hr class="wp-block-separator"/>



Kovler’s father was skeptical about the new venture, but Ben was able to convince him that his family had done something like this in prior generations. “I said, ‘We&#8217;ve done this before, let&#8217;s just do it again,’” Kovler recalls.



Shortly after that conversation, his father called his longtime friend, the legendary hedge fund billionaire&nbsp;<a href="https://www.forbes.com/profile/leon-g-cooperman/">Leon Cooperman</a>&nbsp;to invest in Green Thumb.



Cooperman, now 78 and worth $2.5 billion, was thoroughly impressed with Kovler’s vision and put down $4 million. Since retiring in 2018, he now invests his family’s money, about 2% of which is in GTI. He has also invested in other cannabis stocks such as&nbsp;<a href="https://www.forbes.com/sites/willyakowicz/2021/09/17/inside-the-battle-over-florida-the-countrys-largest-medical-cannabis-market/?sh=4afdb16c34af">Trulieve</a>&nbsp;and&nbsp;<a href="https://www.forbes.com/sites/willyakowicz/2021/02/22/gum-billionaire-beau-wrigley-to-take-cannabis-company-public-through-spac-deal/?sh=5f0eaa1a74fa">Ceres</a>, the SPAC that’s bringing&nbsp;<a href="https://www.forbes.com/sites/willyakowicz/2021/02/10/billionaire-beau-wrigley-says-his-cannabis-company-will-be-bigger-than-the-family-candy-business/?sh=19f20900451c">billionaire Beau Wrigley’s cannabis company</a>&nbsp;public. “I’m not betting the ranch,” Cooperman says. He’s since put more money into GTI and says his return has been around eight-fold.



As his grandfather did with Jim Beam, Kovler is focused on building out GTI’s portfolio of brands. Today, it includes Rythm, which sells cannabis flowers;&nbsp;<a href="https://www.forbes.com/sites/zackomalleygreenburg/2019/07/26/beboe-cannabis/">Beboe, a cannabis vaporizer company</a>&nbsp;that the&nbsp;New York Times&nbsp;once dubbed as the “Hermès of marijuana”; Incredibles, which makes THC-infused chocolate and other edibles, and Dogwalkers, which sells pre-rolled joints.



Emily Paxhia, the cofounder and managing partner of cannabis fund Poseidon Asset Management, invested in GTI in 2016. She now points to the numbers—GTI increased its revenue during the first half of 2021 by 87.3% to $416.3 million and it recorded its sixth consecutive quarter of positive cash flow during the second quarter—but she says when they invested the company was still a young startup. Paxhia believed in the team because she saw something she recognized in Kovler and his CFO, Anthony Georgiadis.



“I think of them as the [Warren] Buffett and [Charles] Munger of our space, they are very focused on business fundamentals, cash flow,” she says. “Compared to the other groups that were like carrying sensational public listings, GTI was like the quiet giant in the background where they were putting out earnings, creating shareholder value, being prudent.”



<h4 class="wp-block-heading" id="h-"></h4>



<h4 class="wp-block-heading">CANNABIS LAWS BY STATE</h4>



<div class="wp-block-image"><figure class="aligncenter size-large is-resized"><img loading="lazy" decoding="async" src="https://cms.forbesafrica.com/wp-content/uploads/2021/09/Screenshot-2021-09-27-at-09.35.10-1024x743.png" alt="" class="wp-image-52656" width="547" height="397" srcset="https://cms.forbesafrica.com/wp-content/uploads/2021/09/Screenshot-2021-09-27-at-09.35.10-1024x743.png 1024w, https://cms.forbesafrica.com/wp-content/uploads/2021/09/Screenshot-2021-09-27-at-09.35.10-300x218.png 300w, https://cms.forbesafrica.com/wp-content/uploads/2021/09/Screenshot-2021-09-27-at-09.35.10-768x557.png 768w, https://cms.forbesafrica.com/wp-content/uploads/2021/09/Screenshot-2021-09-27-at-09.35.10.png 1406w" sizes="(max-width: 547px) 100vw, 547px" /></figure></div>



Vivien Azer, an analyst and managing director at Cowen, believes the timing is right for GTI’s big investment in New York. &nbsp;While the state’s medical market is tiny—producing $150 million in revenue last year—as it transitions to adult-use, a tidal wave of consumer demand is rising. Azer estimates that when the New York market matures, it will hit $5 billion in sales, and all 10 companies currently in the market are racing to ramp up cultivation capacity.



“With a 14-state footprint, GTI has plenty of experience building out new cultivation to satisfy a market transition from medical use to adult-use,” Azer says. “For them, it’s a little bit rinse and repeat.”



Unlike his great-grandfather, who waited for Prohibition to end, Kovler isn’t holding back while federal legalization is worked out in Congress. “We’re not looking for change at the federal government to enable something—the business has enough momentum and we are going,” he says while surveying the 40-acre plot that will soon be blooming with cannabis flower. “Our business is in growth mode.”



By Will Yakowicz, Forbes Staff

Tag: Cannibis

FORBES AFRICA SOCIAL MEDIA

Weeding Out Challenges in the Cannabis Economy

The Making Of New York’s $150 Million ‘Cannabis Campus’