SA investors are following global trends by investing in marijuana companies whose value has gone through the roof in the past few weeks. Picture: REUTERS
SA investors are following global trends by investing in marijuana companies whose value has gone through the roof in the past few weeks. Picture: REUTERS

Some local investors are cashing in on the burgeoning marijuana industry even as SA takes baby steps towards legalisation.

Investors with offshore trading accounts have accessed the sector through instruments such as the Horizons Marijuana Life Sciences Index ETF, which tracks listed North American cannabis firms.

The index, which has roughly doubled in value since listing in April 2017, surged as much as 45% in the nine trading days to Monday as alcohol conglomerates started wading into the pot sector. Earlier in Augustthis month, Constellation Brands, which makes Corona beers in the US, poured another $4bn into Canadian cannabis company Canopy Growth. The news nearly doubled Canopy Growth’s US-and Canadian-listed shares in the two weeks to Monday.

Other cannabis stocks have climbed in recent days after BNN Bloomberg TV reported that Diageo, which makes Guinness beers and Johnnie Walker whiskey, was in talks with at least three Canadian weed producers about a possible deal.

Not long before, Molson Coors Brewing Company said it would start a joint venture with Hydropothecary Corporation to make cannabis drinks in Canada, which is in the process of legalising the recreational use of marijuana.


$200bn

The amount global cannabis sales are expected to reach by 2032


Ricki Allardice, wealth manager at Sharenet Wealth, said "the response has been great" since Sharenet gave clients access to the Horizons ETF several months ago. He said those retail clients – who were surprisingly mostly older investors , he said — have been handsomely rewarded since mid-August. "It’s one of those growth industries that people are really interested in," Allardice said.

While some in the industry had expected older clients to shy away from these investments, a number of retired investors "are very excited about this. They see it as a good bet because it’s an emerging industry that’s been functioning for decades despite staunch laws against it."

The index tracks medicinal, recreational and industrial marijuana companies — with its biggest constituents being are Aurora Cannabis and Canopy Growth, whose market capitalisation in Toronto was about R153bn on Wednesday – making it bigger than Old Mutual.

In an investor presentation in Augustthis month, Constellation Brands and Canopy Growth listed SA as a potential market since the country is moving towards legalisation for medicinal purposes. In Lesotho, which became the first African nation to legalise medical cannabis in 2017, Canopy Growth already has an operation, having bought licensed grower and supplier Daddy Cann Lesotho for about R315m bn in May.

They said Lesotho had ideal growing conditions and was "strategically positioned for the future medical cannabis economy of Southern Africa … including the potential market of SA".

Global cannabis sales were expected to reach over more than $200bn by 2032. Tom Adams, MD and principal analyst at BDS Analytics, said the full financial effect of legalisation "will not be realised for many years to come".

hedleyn@businesslive.co.za