Investment company Silverleaf Investments is the first-of-its-kind venture capital company in South Africa. The company is focused on investments throughout the entire cannabis value chain by providing finance and active hands-on management support to scalable, growth-oriented cannabis small, medium-sized and microenterprises (SMMEs) that will transform the cannabis industry in the country.

“The cannabis industry is rapidly growing globally and South Africa is no exception. With the decriminalisation of cannabis in 2018, there has been a surge of interest in this emerging market that has the potential, in time, to become a serious asset class,” states the investor.

“The cannabis industry is very exciting for its potential economic returns, environmental,social and governance and its potential to benefit the planet, states the company.”

South Africa and the sub-Saharan Africa region are known to have driven a surge of cannabis production during the pandemic. Industry entrepreneurs and smart investors are gearing up for greater growth as legislation changes take effect across the world.

Globally, the legal market is forecast to reach $80-billion to $100-billion by 2030.

“Although there is much excitement in this space, and we continue to see enormous amounts of capital being spent by both investors and entrepreneurs, much of the industry is nascent with high growth potential, amazing ideas, and progressive business owners.

“However, most of the cannabis SMEs are just not investment-ready. With the right guidance and support, we believe that these businesses can become the future of the industry,” says Silverleaf Investments CEO Darryl Weisz.

“The most critical aspect is building these businesses within the current laws of the land, as Silverleaf Investments can only invest in cannabis businesses that comply with the current laws,” he adds.

INDUSTRY CHALLENGES

South Africa, blessed with an idyllic climate to thrive, has a rich heritage in cannabis cultivation and much sought-after land strains and craftsmanship that spans centuries.

However, the country is also in dire need of investment across the entire cannabis value chain to take advantage of rising global demand.

Without a developed value chain, the industry will continue to struggle to get on its feet.

Following the legalisation of private use and cultivation of medical and industrial cannabis in 2018 and a government commitment to finalise all aspects of legalising, South Africa has seen a flurry of investment in licensed medical and industrial cannabis facilities and product manufacture and retail.

The industry, however, is languishing in the uncertainty of the State dragging its feet in promulgating any further reforms. Effectively, this has placed a "handbrake" on industry growth and investment, resulting in many businesses operating illegally.

Cannabis has nevertheless been high on South Africa’s economic growth agenda and featured in President Cyril Ramaphosa’s 2021 and 2022 State of the Nation Addresses (SoNAs).

Ramaphosa stated in his 2022 SoNA that the industry had the potential to create over 130 000 jobs, and favourable legislation was key to achieving this.

Without legislation change and workable plans to grow the industry, however, the local cannabis industry will continue to trail behind global counterparts.

“In the last five years, we have seen very little movement from the government. That said, the recent Cannabis Phakisa Action Lab held from June 19 to 23 this year, has been warmly welcomed by cannabis stakeholders. It, however, remains to be seen whether the good intentions of the President will translate into action,” adds Weisz.

As a result of legislation restricting the opening of the cannabis value chain, Weisz points out that cannabis SMMEs in South Africa are lacking.

“Cannabis SMMEs that have the overall skills and knowledge to build investable and commercially scalable businesses across the entire cannabis value chain. A further barrier to these SMMEs is limited access to development and commercial capital owing to the sunrise nature of the cannabis industry and the slow pace of legislative change.”

He adds that, as has been predicted by many industry experts and international research houses, with the right government and investment community support, the South African cannabis industry (both industrial and medicinal cannabis) has the potential to develop into a global powerhouse. This includes applications in cultivation, processing, manufacturing, and the endless range of products that cannabis offers.

“Our country is blessed with an idyllic climate, large tracts of available, arable land, a range of indigenous land strains that are in demand across the world, and hundreds if not thousands of years of knowledge cultivating cannabis across the region.”

ACCELERATOR PROGRAMME

Silverleaf Investments has had the opportunity of interacting with over 200 cannabis companies across the entire cannabis value chain since inception, and says it has been impressed with the quality of entrepreneurs that have launched these cannabis businesses in very difficult market conditions in anticipation of the government relaxing legislation.

As a result, most of these cannabis SMMEs have not achieved the required traction and are not investment-ready.

Silverleaf Investments has decided to put up its own capital and launched the Silverleaf Business Accelerator.

The objective of the accelerator is to take early-stage commercial cannabis SMMEs that have the potential to scale and provide some initial working capital and focused business and professional skills that will position the Accelerator company with the opportunity of securing growth capital once it has completed the Silverleaf Business Accelerator programme.

“Silverleaf Investments will be actively looking for investors to partner with it to co-invest in the Silverleaf Business Accelerator, as we believe that the most exciting high-growth scalable SMMEs will emerge from our accelerator.

“The Silverleaf Business Accelerator programme is designed to match the realities of the local cannabis entrepreneurial ecosystem. It is not just about the money as Silverleaf provides the Accelerator company access to its vast business experience in all aspects of business through its directors and its professional skills team.”

The objective of the Silverleaf Business Accelerator programme is to identify and select the leading cannabis SMMEs that have the potential to scale that are not yet investment-ready and put them through a hands-on focused Business Accelerator. This will ensure that the cannabis SMME will, after three months together with Silverleaf Business Accelerator, be in a position to prepare an investor memorandum to secure growth capital.

Successful applicants to the programme will gain access to a range of services, such as professional legal services to review all relevant agreements that include shareholder agreements, employment agreements, leases, contracts distribution agreements and other agreements.

This comes in addition to professional accounting services to review all governance and compliance requirements, submissions and ensuring that financial records are up to date.

Silverleaf also provides business consulting services, marketing services, mentorship and management support.

Services will also include focused weekly specialised cannabis training sessions with Cheeba Africa Cannabis Academy.

Companies wanting to apply for the accelerator programme must have an established business that is registered as a company, must be earning revenue from legal means and have a company valuation of at least R2.5-million.

The accelerator company will sign an engagement letter which sets out all the terms and conditions for participation in the accelerator. The founders must work exclusively within their business without any outside business interests, be operating within the Silverleaf Investments targeted focus areas which would include businesses allied to the cannabis industry, and be legally compliant with all relevant certifications where required.