Three years ago, Tommy Doran gave up on his plans to become one of Zimbabwe’s first producers of medicinal cannabis. By this time next year, he could be involved in some of the first exports from the country.
Doran, a Zimbabwean, is MD of Eco Equity, a London-based company that is investing in a cannabis project in Zimbabwe. It is one of the country’s first such projects, after started government licensing cannabis growers in 2018.
An earlier call for licences had excited Doran. He did the numbers, and decided it wasn’t the right move.
“I spent about six months working on it and discussing with an American consultant. Then it became quite clear that it was too big for me. So I shelved it,” Doran recalls in an interview with newZWire.
But not long after this, his brother, Jon-Paul, an investment banker based in London, got a cannabis licence. He called on Tommy’s experience studying the market. The timing was right.
Eco Equity has set up in Zimbabwe and, were it not for COVID-19, the company would have by now exported the first crop. Planting is now expected by year-end, which would see exports early next year.
“I want to be planted by the end of the year. If we can plant by the fourth quarter, we would look at harvesting at the end of Q1 (2022). Those timelines could change. If we get the support overseas that we anticipate, and pull the trigger, we could have greenhouses on the ground in the second quarter (of 2021),” he said.
Doran is optimistic about the environment, rare in a market where Zimbabwe’s policy inconsistency, red tape and currency changes have frustrated many investors.
“The Zimbabwe climate has been the best it has been for some years. The rates are stable, government policies are pretty stable,” says Doran.
Risk remains, he admits. But this, he says, is why Eco Equity decided it needed someone who knows the country to run point on the ground in Zimbabwe.
Doran says: "If you’re a foreign company coming here with a foreign mentality, I don’t think you’ll last very long."
Tommy manages the project in Zimbabwe, while his brother raises capital in London. It has worked so far.
Last year, Eco Equity raised US$24.3 million from investors. The company is looking to raise further funding as it develops the project, even though COVID-19 may have changed the investment terrain.
“Your traditional investors are thinking differently. A lot of people are thinking of just keeping cash. They don’t know where to go with their money,” Doran says.
To secure markets, Eco Equity has negotiated offtake agreements in the UK and the EU.
“We have a letter of intent with a pharmaceutical distribution company in England that has the licence to import and distribute controlled substances. The other market will be into Europe.”
A full production, the company projects revenues of up to US$35 million, based on current prices. It’s all very tempting for anyone outside looking in, but it’s not as easy as it might look.
“These sorts of projects are not easy projects. You’ve got to have a lot of patience. They take time to develop,” Doran cautions. “You’re trying to pioneer a new industry in an African country, an industry that was traditionally illegal.
"It’s not like tobacco where you can go find a farm and plant. We’re under no illusions.”
Licences are not cheap. When first issued in 2018, investors had to pay US$50 000. Doran says while this was high, it is necessary to keep the sector free of the “sharks” that roam the industry. There’s a reason why licensing is tougher on medicinal cannabis than it is for industrial hemp.
“You can smoke 50 hectares of (hemp) and nothing is going to happen to you. There’s nothing in it, whereas medicinal cannabis is different. Your barrier to entry has to be at a level where you can keep an eye on it.”
Keeping it at home
The company could have picked other places for the project, but “working from home” has its charm.
Doran says: “I believe there are easier places to grow it in Africa than Zimbabwe, because the industry has matured there. But Zimbabwe is home. I believe this project can really help through job creation. I’d rather benefit where I’m from, than go set up and benefit another country.”
Eco Equity currently employs 60 workers, and staff may grow to over 300 as the project advances.
A dam has been built at the site. A greenhouse, on 30,000 square metres, is being constructed by DutchGreenhouses. Australian cannabis company, Delta Tetra, is on site to ensure planting meets the EU’s Good Manufacturing Practices (GMP) certification.
Zimbabwe has very high ambitions for cannabis – too high, according to other players.
Finance Mthuli Ncube has said he expects revenues of as high as US$1.2 billion annually. He has even proposed a levy on exports of cannabis extracts.
While COVID-19 delayed progress, Eco Equity says it is in no rush.
“It’s not a race,” Doran says. “We want to do it properly.”