Does Lesotho have a comparative advantage in medicinal Cannabis Farming?

Tjonane Matla, ‘Makarabo Matšumunyane and Tshepo Heqoa took a 2 hrs 20-minute drive to Medigrow farm located about 110 kilometres from the city of Maseru, where the tiny village of Marakabei, along the Senqunyane River in the highlands of Lesotho, is just about to be transformed into one of Lesotho’s economic hubs.

What about our Native Crops?

Cannabis plant during flowering

Cannabis plant during flowering

 

While the dialogue around the use of Lesotho’s native crops vs the imported selected strain of seed continues, clarification on the differences between the two was provided by the South African Master Grower, Cornel van der Watt.

Cornel is a highly-experienced grower with over 25 years’ experience and at that time was working in the Cannabis hub of Colorado, in the United States of America, when he was head hunted by Medigrow CEO, Andre Bothma.

According to Cornel there is a distinct difference between the local cannabis and medicinal cannabis in terms of DNA and usage. Local cannabis, commonly known as Marijuana, is used for recreational purposes due to its high level of Tetrahydrocannabinol (THC). THC is a psychoactive ingredient of Cannabis and is a controlled substance in terms of the UN Convention (to which Lesotho is a signatory) and as such, prohibited in many countries. On the other hand, the imported strain of cannabis grown by Medigrow is considered more of a medicinal cannabis, as it has a very low THC of less than 1% and higher Cannabidiol (CBD).

THC is the psychoactive ingredient in cannabis that produces the feeling of being high while CBD is a non-psychoactive component of cannabis that is responsible for aiding in the healing properties of the body’s cells.

In addition, medicinal cannabis is cultivated in pristine controlled environments, with the extracted oil being intended for pharmaceutical use and therefore the quality and purity of the product is essential.
The next big thing In terms of the global medicinal cannabis market the USA, Europe, Canada and Australia are the largest markets.

Frost & Sullivan’s recent analysis on medical cannabis finds that the total revenue of this market in the United States alone was expected to grow from USD5.32 billion in 2017 to $10 billion in 2022, at a compound annual growth rate (CAGR) of 13.6%.
Canada’s measure of real gross domestic product will get a boost after the legalization of medicinal cannabis adds as much as $8 billion to the country’s economy, according to Toronto-Dominion Bank, Financial Post reported. On the other hand, Canadian Parliament’s budget office made a first stab at estimating the size of the market: it guessed that in 2018 Canadians would spend C$4.2bn-6.2bn ($3.4bn-5bn) on cannabis, or about 0.2% of GDP. That is a little less than they spend on beer.

Before incorporating its estimates into national accounts, StatCan has to figure out how much existing activity, such as electricity used by illicit “grow-ops”, is being used in the cannabis economy, Economist report. The recent CBC News Bloomberg data shows there are 84 public companies trading on Canadian stock exchanges that are somehow connected to the cannabis industry, and collectively they are worth $37 billion US.

The business valuation of Medigrow has grown exponentially, just this year March of 2018 Supreme Cannabis, a company listed in the Toronto Stock Exchange bought 10% of Medigrow for 10 Million Canadian Dollars That means the whole business was valued at USD 70 million (M 1 billion in March2018)

The endo-cannabinoid system in the human body was discovered in 1988, cannabis popularity grew massively in most parts of the world. Medical cannabis is currently at the highest demand world-wide, hence Lesotho’s move to adjust Colonial Pharmacy Act of 1868 with Drugs of Abuse Act of 2008. In 2017, nine years after the Drugs of Abuse Act of 2008, Lesotho became Africa’s first country to grant a license for the cultivation of medicinal cannabis.

Why invest in Medigrow, located in Marakabei Lesotho?

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The Mountain Kingdom of Lesotho is divided into four physiographic regions which are the Mountain Range in the East, the Foothills in Central Lesotho, the Orange River Valley from North East to the South West, and the Lowlands in the West. That makes two thirds of Lesotho’s terrain mountainous with average elevation of 2,438 meters above sea level.

 

Medigrow Plant at Marakabei

Medigrow Plant at Marakabei

 

It is this altitude that contributes to the cooler temperatures throughout the year in the scenic mountains of Lesotho. Agronomists claim that it is the altitude that reduces pest that give Lesotho a comparative advantage to be suitable for hydroponics medicinal cannabis farming.

 

Marakabei could have not been the best location to setup Medigrow hydroponics farm if it was not because of water in abundance from the Senqunyane River. One must have seen Andre Bothma’s smile and confidence when he talks about Marakabei water, scenery, people and mountains. On the other hand the Master Grower Cornel van der Watt cannot just stop explaining how the climate is free of pests and contamination therefore an advantage over other countries that farm the product.

“The fact that we are high in altitude and lower temperatures are a natural repellent of pests, therefore this contributes to the purity on our product as there is no need of inorganic pesticides on the plant.” states the Master Grower.

Lebohang Liphoto who is the Chief Operation Officer at the farm further, commented that Marakabei is an ideal place for the growth of medicinal cannabis as the early mornings are cold, and there is intense sunlight all year round. Moreover he also pointed out the low humidity and dry air as contributing factors to a perfect quality end product.

As we were to ask if these were the only favourable competitive points that we could write home about. Andre further brought to the table, a very important aspect of the business. Production Cost Minimization. “Lesotho has one of the cheapest hydro power, and very low cost on water supply that shall enable Medigrow to enjoy very low production costs”.

The hydroponics farm or pharmaceutical factory is about 110 hectors where all operations from production to extraction of oil will be done.

The entity has just extracted its first oil, in an attempt to test the extraction machine in late October 2018, and it is expected that at full capacity shall be done in February 2019 when the construction of the extraction facility is 100% complete. In 2024 when all construction work of production hydroponics greenhouses are complete Medigrow shall produce monthly 3600 litres of oil.

Cannabis oil

Cannabis oil

 

While flipping through the Lesotho’s Ministry of Health records since the legislation of Drugs of Abuse Act, Medigrow was registered as the first Basotho Company to be licenced to Operate, Cultivate, Extract and Process hemp and cannabis for medicinal purposes.

A thumb suck analysis for an investor who is aspiring to invest in the next big thing, medicinal cannabis appears to be the way to reap very high returns in the nearer future. However, it might be advantageous not to reinvent the wheel, but simply invest in an already leading entity. So far the shareholders have invested USD 25 million and they shall be opening for a further USD 20m million share capital in order to operate at full scale, by 2024.

According to Medigrow, the Central Bank of Lesotho (CBL) is still working on its application for the Investment Public Offering (IPO).

Should things go according to plan, the IPO dates are currently written with a pencil for 1st or 2nd week of December 2018.
Community Impact

Marakabei – Mondragon village of the Kingdom in the sky
A small village with a population of about 2,000 habitants is just about to enjoy an economic injection of approximately USD 984,529 (M 14,000,000) per month as salaries for the 3,500 skilled and unskilled labourers of its newly established farm will have at full capacity.

Currently 206 Skilled people from Marakabei village have been employed. LSP Construction (Pty) Ltd the construction company constructing the facility has 300 people employed.

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In addition, Medigrow is establishing orchards of peach trees for community development as well as tunnels for vegetables to be procured from the community by the farm canteen.

Cannabis cultivation at Medigrow

Cannabis cultivation at Medigrow

 

It is of paramount importance to state that Medigrow provides staff with lunch.

GDP potential
With that kind of economic impact in one community the number of licences issued by the Ministry of Health the potential impact of this new sector on the national economy is set to be larger than that of the mining sector, upwards of 10% with a great deal of forex entering the economy.

This is without considering the additional potential of downstream activities from use of the oil in country and also the waste
material.

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