Labat Africa’s Brian van Rooyen on how SA is missing the hemp harvest
Billions in cannabis products imported to potential dagga central
● Brian van Rooyen, founder and CEO of investment holding company Labat Africa, says the cannabis industry has grown so fast that the regulatory authorities “just can’t cope” and SA is lagging behind in the development of cannabis for medicinal use.
Labat is the only JSE-listed stock in cannabis. Van Rooyen says the department of trade & industry has estimated that a deregulated cannabis industry would be worth R27bn-R30bn by 2022.
“We need to deregulate this thing as fast as we possibly can,” he says.
“It can contribute so much more to the GDP of this country. With all the industries that have fallen by the wayside, you can replicate their contributions 10 times over with hemp and the local production of CBD [cannabidiol] products.”
Licence-holders who want to grow cannabis for medicinal use can only do so for harvesting and export.
“We’re having to import CBD products which we could be manufacturing ourselves. So you can sell these products here but you can’t manufacture them here.”
Labat has been buying companies engaged in various sectors of the industry.
Now armed with one of eight commercial licences in the country to grow high-THC (tetrahydrocannabinol) content dagga, it has begun doing so in hi-tech greenhouses in the Eastern Cape and Gauteng. THC is the psychoactive ingredient used for treating pain, epilepsy, dementia and cancer.
Labat has a R2.5bn offtake agreement to supply a Swiss pharmaceutical company with 6,000kg of high-THC content dagga a year for five years. Its first crop will be ready for export in November, he says.
“Manufacturing happens there. The law doesn’t permit any THC processing in SA.”
When this changes Labat will supply local pharma manufacturing companies.
“Our focus is on pharmaceuticals for the local market, so we will start doing our own extractions of APIs.” These are the active pharmaceutical ingredients in dagga that have proven to be a good substitute for opiates.
“We want to supply the big pharmaceutical companies with the content for them to put into their headache tablets, dementia tablets and so on.”
His aim is to have 40,000m² under cultivation. The first 10,000m² are already “under the roof” in Gauteng.
He is targeting 6% of the local industry, he says.
Labat has taken “a conscious decision” not to enter the recreational market. Big potential funders like the Industrial Development Corporation and the Public Investment Corporation “wouldn’t want to get involved in cannabis for recreational purposes”.
Van Rooyen has been meeting investors, including big development funders, and hopes to get R112m by the end of July.
“But the big one for us is the market.” Labat’s share price has rocketed from 29c to a three-year high of 79c in the past two weeks, and it was announced last week that private equity and venture capital investor Verityhurst wants to take R50m worth of shares in the company.
Van Rooyen says the “biggest opportunity” for Labat is hemp. Regulatory restrictions have held back its huge economic growth potential, he says.
He cites the automobile industry in the Eastern Cape, which uses R6bn worth of hemp plastic a year in dashboards and side panels.
“We have got hemp plantations but that whole R6bn of plastic is imported from France and China because there’s no hemp processing facility in SA.”
With hemp now a schedule 4 substance and no longer a narcotic, Labat is moving into the opportunity gap created, big time.
“We’re talking to the owners of the sugar mills that have been closed down, because we believe they should be turned into hemp processing facilities,” he says.
More than 250 products can be created from hemp, including hemp plastic and hempcrete, which is more durable and environmentally friendly than normal concrete.
Labat aims to process the hemp and be a major supplier to the construction and auto industries. Its first processing plant will be operational within three months, says Van Rooyen.
The closure of sugar mills has left hundreds of small farmers out of work.
“We’ll be empowering farmers to farm hemp. Provide them with training, technology, the seeds, implements, logistics to move the hemp from farm to processing facility, and we’ll take their offtake from them.”
Hemp absorbs carbon dioxide, so Labat will also assist farmers to claim carbon credits.
He says there’s a stream of applications coming in from people who say they have a hemp licence but don’t know what to do with the plant once they’ve grown it.
He’s been talking to landowners and trusts in the Eastern Cape and KwaZulu-Natal, including King Goodwill Zwelithini’s Ingonyama Trust.
“They’ve shown a lot of interest because this is about job creation.”
He says 1ha of hemp, which can be harvested two and a half times a year, can give farmers a profit of R80,000 and create four sustainable jobs.
“That’s why every premier in his state of province address and the minister of finance has called on the government to speed up the deregulation process for licensing hemp.”
Van Rooyen, 60, a former president of the South African Rugby Union, listed Labat, one of the first BEE companies on the JSE, 25 years ago. To some market watchers it has never really got traction.
“I got traction and I spun it off, very successfully,” he says.
“It was an investment holding company. We then got into IT, spun our IT businesses off into a private entity, our industrial business to Sasol and AECI.
“That’s what Labat was over the years.” One “happy shareholder” said he came in at 50c and exited at R1.80, he says.
“Everybody that has been in Labat has made a lot of money because they’ve come and they’ve gone, come and gone.”
Van Rooyen owns 40% of the company, which has a market capitalisation of R200m, so he’s done well enough “to have a good life”. He says he could have had a higher market cap “if I’d followed some others and been corrupt. But I’m better off knowing I’m not at any state capture inquiry. I was also approached by the Guptas.”
He won’t go into detail.
“Labat was at one stage a big contractor to Eskom, that’s all I will say.”
He was never invited to Saxonwold.
“They came to see me in my office.”
We’re talking to the owners of the sugar mills that have been closed … we believe they should be turned into hemp processing facilities