Cannabis: Taking the high ground in investment

It's staggering to think that forecasters have predicted that by 2025 the global cannabis industry is expected to reach $146 billion (R2.2 trillion), with the total market value of the South African cannabis industry raking in about $1.8bn. These are the numbers being tossed around, and South Africa’s forward-thinking stance towards the five-pointed leaf sets it up nicely to become a major player in the international market.

Since the legalisation at the end of last year, the cannabis industry has proved to be an emerging market, giving South Africa the opportunity to run with the big dogs in this exciting new growth sector. In his Budget Speech Finance Minister Tito Mboweni even went so far as to say that policy changes in the industry could result in a potential source of revenue for South Africa.

With StatsSA recently revealing that unemployment is not on the decline, it certainly is an opportune time to unlock the economic benefits, as well as the resulting job creation opportunities, that this industry presents.

According to the New Frontier Data report, the annual cannabis consumption rate in Africa is 11.4 percent while the global average is only 6 percent, which bodes well for one of their sustainable development goals, which is to “promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all”.

The cannabis industry has the potential to create work opportunities for both low-skilled and high-skilled workers, it said, due to the fact that cannabis businesses will require management staff, administrative staff, manufacturing staff, agricultural operations and retail operations. In the US, 321744 jobs were created in the cannabis industry, and 35 percent were in retail operations.

The question on every investors’ mind is whether to invest in the South African cannabis industry? The collective word on the street is yes. If you’re looking to invest on the ground floor of one of the potentially largest markets globally, now’s the perfect time. Many companies are jumping on the cannabis bandwagon, one of which is CanbiGold, a South African holding company, which is to list on the Canadian Stock Exchange in the next 18 months to two years and possible a secondary listing on the ZAR X, a South African stock exchange. This is only one example of the investment opportunities that are budding across the sector.

As exciting as this new world of cannabis investment is, it’s important to not get caught up in the hype and invest without thinking. Buyers of cannabis shares are mesmerised by the potentially bright future the sector presents but there hasn’t been any public cannabis related listing on the JSE yet.

However, that is set to change. One of the biggest companies on the JSE by market capitalisation, Anheuser Busch, is invested in the marijuana industry, and just like alcohol the odds are that cannabis will sell sending shares rocketing. But as the old adage goes, what goes up must come down, so maybe it might be pertinent to keep an eye on the market and see what happens as the legislation changes. After all, you wouldn’t want to see your investment going up in smoke.

Daniel Kibel is founder and director of CM Trading.

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