State must come to the cannabis party, lift restrictive laws: Labat Africa CEO

The market for locally manufactured cannabis products is set to explode in SA and on the African continent if regulations are eased, says Brian van Rooyen.
Brian van Rooyen, CEO of Labat Africa, which has positioned itself to be a major player in the potentially lucrative local market for cannabis products, says its plans will not be affected by a recent US Food and Drug Administration warning that some of these products have serious health risks.

“The FDA has flagged THC, the stuff that makes you high, for recreational purposes, but people will continue to use it for medical purposes. And our focus has been primarily on the medical pharmaceutical side,” Van Rooyen .

THC (tetrahydrocannabinol) is the psychoactive ingredient in cannabis necessary for treating pain, epilepsy and dementia.

“Our focus is on pharmaceuticals for the local market. We’re far ahead in research & development to extract APIs [active pharmaceutical ingredients in cannabis that have proven to be a good substitute for opiates] and are looking at all possible usages of the APIs.”

Labat has also been testing compounds in cannabis that could be used as a palliative for those infected with Covid, he says.

“We want to supply the big pharmaceutical companies with the content for them to put into their headache tablets, dementia tablets and so on.”

Although not yet allowed by law to process and manufacture these ingredients, Labat has “ethical approval” from the South African Health Products Regulatory Authority (Sahpra) to do observational studies and clinical trials to replace opiates with cannabis for pain management, dementia and other treatments.

This work, which is being done through its East London research subsidiary Biodata, is far advanced, he says. “All our products are trialled with Biodata to ensure the safety and efficacy of the medicine and recommended protocols.”

Labat, which Van Rooyen started in 1995 as an investment holding company and listed on the JSE in 1996, became the only listed cannabis health-care company in SA in 2019 when it announced it was going to enter the market for cannabis health care and wellness products. Since then, it has positioned itself as the “go-to for anybody who wants to come to South Africa to take advantage of the legalisation of cannabis”.

“A lot of international companies have approached us recently to form partnerships.”

Referred to by Bloomberg as “South Africa’s cannabis giant” after its dual listing on the Frankfurt Stock Exchange on December 20 2021, it is only allowed under South African law to export medicinal-quality cannabis, of which it has 10,000m² in “under the roof” cultivation in Gauteng.

All our products are trialled with Biodata to ensure the safety and efficacy of the medicine and recommended protocols

Brian van Rooyen, CEO of Labat Africa

It has a R2.5bn offtake agreement with a Swiss-German pharmaceutical company to supply 6,000kg of high-THC-content cannabis a year for five years.

“We’re allowed to plant cannabis which contains 5% CBD [cannabinoid] oils, but not allowed to extract these ingredients in South Africa. This has to be done abroad.”

They’re champing at the bit to supply local pharmaceutical companies with self-processed and -manufactured CBD products but, by law, can only supply them with products processed and manufactured overseas.

“So although we’re considered the go-to company, the only thing we can do now is compete in the retail space with the likes of Clicks, Dis-Chem and Pick n Pay, which import cannabis-related lifestyle products.”

Labat has just acquired Miami-based company Echo Life, which has a range of CBD lifestyle products such as energy bars, energy drinks, beauty creams and CBD smokables, which Labat is selling in its online and CannAfrica stores. It’s about to sign an agreement with one of the major pharmaceutical chains, which Van Rooyen says he is not at liberty to name yet, to be a distribution outlet for these products.

The smokables, which contain CBD oils but no tobacco or nicotine, are particularly popular, he says. “We brought in 5,000 packs, they were all sold. Brought in another 7,500 two weeks ago and they’re almost all sold.”

Labat will be exporting its newly acquired range of CBD lifestyle products from Echo Life to European and other markets as well, but has not begun to yet because its hands are full in the South African market.

Prohibition Partners, which does worldwide research on cannabis, has announced that the South African cannabis market will be worth R28bn by 2025. But only, says Van Rooyen, if the government comes to the party.

“The government has signalled it wants us to grow the local cannabis industry but we can only plant, cultivate and export. It makes no sense. Premiers and finance ministers go on about the huge contribution to the economy cannabis can make, and yes, it’s all true.

“So the sooner they get the legislative issues dealt with the better.

“I don’t know why they’re dragging their feet. But I think they’re moving on it now. There’s been a lot of pressure from community-based groups and political parties. There’s a lot happening to make sure government moves on the regulatory side.”

When that happens he expects the market for locally manufactured cannabis products to explode in SA and on the African continent. “It’s going to be huge”, he says.

And Labat will be ideally placed to benefit.

“When regulatory approval is given we’ll have first-mover advantage. We won’t have to start from scratch.”

A lot of interest has been expressed, especially from Europe and Australia, in the work Labat is doing. Several international partnerships have been formed with several more in the pipeline, he says.

Its focus will be on exporting to European, Australian, US and Canadian markets. Given that the processing and manufacturing of APIs is well advanced overseas, he concedes that breaking into these markets won’t be easy. “That’s why we can only do it with partnerships in those countries.”

Because of the quality of SA’s cannabis there is likely to be a good market for its products, he says.

Which is why several big investors encouraged Labat to list in Frankfurt. “They were interested in Labat but didn’t want to come to Labat in South Africa.

“They said they’d be very keen to invest in Labat if we had a secondary listing on a European exchange.”

Labat decided to list in Germany after its new coalition government announced it would legalise cannabis for medicinal and recreational purposes.

“The Frankfurt listing will allow us to accelerate our cannabis goals in the European market and offer South Africa and international investors exposure to high-growth investments in the cannabis value chain,” he says.

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