Ripe time to invest in cannabis sector
It is staggering to think that forecasters have predicted that by 2025 the global cannabis industry will reach about $146bn, with the total market value of the SA cannabis industry amounting to about $1.8bn.
These are the numbers being lobbed around, and SA’s forward-thinking stance towards the five-pointed leaf sets it up nicely to become a major player in the international market.
Since its legalisation at the end of 2018 the cannabis industry has proven to be an emerging market, giving SA the opportunity to run with the big dogs in this exciting new growth sector. Finance minister Tito Mboweni even went so far as to say in his budget speech that policy changes in the industry could well result in a potential source of revenue for SA.
With Stats SA recently revealing that unemployment continues to rise, it certainly is an opportune time to unlock the economic benefits, as well as the resulting job creation opportunities, this industry presents. According to the New Frontier Data report, the annual cannabis consumption rate in Africa is 11.4%, while the global average is only 6%. This bodes well for one of the 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 low- and high-skilled workers, the report said, due to the fact that cannabis businesses will require management staff, administrative staff, manufacturing staff, agricultural operations and retail operations. In the US, more than 320,000 jobs have been created in the cannabis industry, and 35% were in retail operations.
So, considering the above, the question at the forefront of every investor’s mind is whether or not to invest in the SA cannabis industry. The consensus on the streets 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, an SA holding company that has invested in several companies across the cannabis value chain and is offering early-stage investors preferential share blocks at R500,000 per block. These are convertible at a 3-1 ratio once CanbiGold is listed.
In Canada the listed cannabis sector has a market capitalisation of more than R500bn. CanbiGold hopes to list on the Canadian Stock Exchange in the next 18 months to two years, with a possible secondary listing on SA exchange ZAR X. This is only one example of the investment opportunities that are budding across the sector.
As exciting as this whole new world of cannabis investment is, it’s important not to get caught up in the hype and invest without thinking. Many buyers of cannabis shares are mesmerised by the potentially bright future the landscape presents. Up until now there haven’t been any public cannabis-related listings on the JSE. But 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 skyrocketing. But we do believe in the old adage of what goes up must come down, so maybe it is wise to keep an eye on the market and see what happens as the legislation around the product changes.
After all, you wouldn’t want to see your investment going up in smoke, would you?
• Kibel is founder and director of CM Trading.