THE government has increased the license fees for growing medical marijuana from M500 000 to M5 million to discourage entities which secure licenses for speculative purposes.
The new licencing regime, which comes into effect on 1 March 2019, is also meant to ensure that all licensed companies have the capacity to venture into the industry.
The Minister of Heath, Nkaku Kabi, announced the new price during his tour of the Medigrow marijuana production farm in Marakabei in the highlands of Maseru on Friday.
In 2017, Lesotho became the first African country to legalise the growing of medical marijuana (cannabis) amid high expectations that the country would immensely benefit from the world-wide industry which is projected by forbes.com to grow from US$7, 7 billion in 2017 to $31, 4 billion in 2021.
According to the Grand View Research Inc, the global medical marijuana market is expected to reach a value of US$ 55, 8 billion by 2025.
As the first African country to legalise the growing of medical marijuana, it appeared that Lesotho was on course to reap the rewards especially after the government issued licences to some companies to grow the product for export.
However, the country still has a long way to ensure the viability of the industry with Minister Kabi last December saying that of the 33 people who acquired licences to grow medical marijuana, only 13 had paid the M540 000 for their operators’ licenses at the time.
Some of the licences were issued during the tenure of the previous seven parties’ coalition government headed by Democratic Congress leader Pakalitha Mosisili but before proper regulations were enacted to regulate the industry.
Titled the ‘Drugs of Abuse (Cannabis) Regulations, the regulations subsequently issued by Mr Kabi last May pegged the main operating licence – which allows the licensee to engage in several activities ranging from cultivation to export – at M540 000 with its renewal fees costing M350 000.
“When the regulations were implemented in May (2019) we made it clear that everyone would pay M540 000 (for the main operating licence) or the M150 000 fee (for those who only intend to grow medical marijuana),” Mr Kabi told our sister paper the Lesotho Times last December.
“The regulations applied to everyone including those who got the licences free of charge before May 2018. Out of these 33 licenses, only 13 people managed to raise M540 000. We wrote to the other 20 informing them that by 1 November 2018 they should have paid the M540 000 or return the licences.”
Mr Kabi said they had to hold back from suing those who either failed to pay up or return the licences at the expiry of the 1 November deadline but the association of the licensees (Phekoane Industry Association) begged the ministry for more time to get its members find the money to pay up.
The minister also said the association begged the ministry not to sue them and requested for more time as they could not get investors while. He said most of the licencees have even gone back to the ministry to ask for assistance in securing investors.
He also indicated that international investors were baulking at demands by some of the licenced locals who were demanding hefty amounts of up to M20 million for partnerships and shares.
“We blocked the issuing of licences to international investors to give Basotho the first priority to invest in this industry. Now they demand M20 million for their pockets as well as 10 to 20 percent of shares to partner with international investors. The investors say the demands are ridiculous. They say that it does not make sense that they have to pay so much money when entering into what should be long-term partnerships. They (locals) are not able to reach agreements with the international investors,” Mr Kabi said.
And on Friday, Mr Kabi announced new fees which he said would ensure that only companies with the capacity to engage in the capital-intensive business would get licenses instead of speculators.
Mr Kabi said the visit to the Medigrow farm kicked off a series of visits to other licensed companies’ production sites to record the progress they have made.
The minister said it is important for licence holders to demonstrate a certain level of progress so that their licenses may be renewed. An operator’s license has to be renewed annually.
“We have embarked on this campaign because we want to see progress made by the license holders since we believe they had applied for those licenses for a reason,” Mr Kabi said.
“We want to see the facilities being set up and physical structure on the ground, bearing in mind the magnitude of this type of business and the finances that are needed to operate it.”
He said while the industry is highly profitable, it is also capital intensive.
“For this reason, we have increased the licence fees from M500 000 to M5 million. For instance, to be at the stage of production it is at the moment, Medigrow Lesotho has already raised M300 million, with more costs still to be incurred.
“This says to us that the industry is highly capital-intensive, although it is also highly profitable. I understand that at full production capacity, this facility will produce about 12 000 litres of cannabis oil per annum, which can raise revenue of over M2 billion per annum.”
The company estimates that it will need to raise about 900 million to set up its full-scale facility.
Mr Kabi further told this publication that the proceeds from licence fees would be used to build the ministry’s capacity to regulate and oversee the industry, as it is currently under-capacitated.
Apart from being a lucrative industry, Mr Kabi further said that the industry will also have a significant impact on the health sector as medical marijuana has been found to have many medicinal characteristics.
Mr Kabi further added that as one of the few countries that have licenced production of medical cannabis, Lesotho needs to develop its human resource capital base to operate the industry.
“We can benefit a lot from the first movers’ advantage as we also have favorable altitude and climatic conditions which significantly lower the production costs.”
Mr Kabi said he was encouraged by the manner in which Medigrow has involved the Marakabei community in its project where, among other things, the locals get first priority for employment.
He said the company has also set up its operations on a slope rather than on a flat plain where agricultural production of staple grains is done.
He said the company has also come up with an impressive arrangement of leasing land from over 60 community members.
Meanwhile, Medigrow Lesotho is on the verge of completing the first ever extraction process of cannabis oil product, pending a certificate of analysis from independent laboratory, ProVerde.
After one year of operation, the company now employs over 250 people.