Africa is not usually front of mind when talking about the burgeoning cannabis market, but according to experts it offers a multi-billion-dollar opportunity for industry players.

The UN estimates Africa sits only behind North America as a cannabis producer and consumer.

Over 38,000 tonnes of cannabis is produced annually in Africa despite it being illegal in most countries.

Gradually the tide is slowly shifting and according to cannabis research firm Prohibition Partners the African cannabis market could be $7.1 billion by 2023.

 

The opportunity is south

Much of the opportunity for African medical cannabis lies in the south of the continent. Three countries have legalised the use of medical cannabis starting with Lesotho, then Zimbabwe and South Africa.

While Lesotho is a landlocked country it is leading the continent. It has ideal conditions with rich, high-altitude soil. The government has granted 80 licences and anticipates the industry creating 30,000 jobs.

When you consider Lesotho is a nation of only 2.2 million and has 27 per cent unemployment – this figure becomes far more important.

Zimbabwe followed suit last year and has since awarded 37 cultivation licences, for scientific and medical use. The government is keen to reduce the country’s economic reliance on tobacco, which is more than half of Zimbabwe’s exports.

In South Africa, while cannabis is no longer banned, regulatory hurdles still exist. Companies must be individually approved to manufacture medical cannabis products.

But once a firm wins approval, they can sell medical cannabis products without restriction in pharmacies so long as they contain less than 20mg of cannabidiol (CBD).

 

African cannabis opportunity growing

Among other southern countries, Zambia has legalised cultivation and production. The latter only occurred this week and Green Party president Peter Sinkamba said cannabis could be “like diamonds and gold”.

However annual licences will cost $US250,000 ($364,236), government supervision will be strict and while exporting is legal, domestic use still is not.

In several other countries including Kenya, Ghana and Uganda, debate about legalisation is happening right now.

The north represents an opportunity as well. Prohibition Partners believes there are 20 million cannabis consumers in Nigeria alone, while Morocco is the world’s largest source of cannabis resin (hashish).

But local politicians remain concerned about illicit use and have not entertained the idea of legalising cannabis for medical use. Additionally, the climate in northern Africa is less than ideal to grow cannabis on a large scale.

In spite of cannabis being banned since 1925, Egypt was actually the place where cannabis’ medical functions were discovered – the famous Ebers Papyrus (written around 1550 BC) prescribes it to treat ingrown toenails.

 

Western players in the market

There are plenty of players in the market but there is only one ASX small cap tapping the potentially lucrative African market.

Last week Creso Pharma (ASX:CPH) announced it would launch its hemp-based cannaQIX products into southern Africa beginning in the first quarter of next year.

It partnered with Pharma Dynamics, which is South Africa’s 11th largest pharmaceutical company.

Creso also announced Pharma Dynamics had sole distribution rights for a further eight countries in addition to South Africa including Lesotho, Uganda and Zimbabwe.

However it only put a clear timeframe on its plans for South Africa, targeting the first quarter of next year.

American companies have been quicker into the game. In May, New-York listed Canopy Growth Corporation (NYSE:CGC) bought local company Daddy Cann Lesotho for nearly $30m.

Also, Canada-headquartered Aphria (NYSE:APHA) formed a new venture CannInvest Africa, which will supply cannabis in countries where it is legal.

At Stockhead we tell it like it is. While Creso Pharma is a Stockhead advertiser it did not sponsor this article.