Marijuana firm fires 370 workers over Shs110b loss

Affected. Workers attend to Cannabis seedlings at the Industrial Hemp Ltd marijuana farm in Kasese District. FILE PHOTO

What you need to know:

  • Industrial Hemp (U) Ltd, founded and legally incorporated in 2012, is currently growing and processing medical cannabis
  • The company has a licence and is currently supervised by the ministries of Health and Internal Affairs, and the National Drug Authority
  • The Narcotic Drugs and Psychotropic Substances Act 2016 allows cultivation, production and exportation of medical marijuana and mandates the minister to issue written consent for medical marijuana

Uganda’s first Marijuana Company is struggling to stay afloat amid skyrocketing losses that have now forced the directors to lay off 82 per cent of workers in view of a $30m (Shs111b) loss occasioned by insufficient power supply.
Industrial Hemp (U) Ltd, a private firm jointly working with an Israel company, Together Pharma Ltd, at full capacity production had planned to produce 708kg of cannabis per month but is producing only 90kgs.
Each kilogramme at a minimum costs $4,000 (about Shs14.8m) and at full capacity, the company had planned to earn $2m (Shs7.4b) per month. But because they are unable to operate at full capacity due to what the company managers called, “unreliable power supply” at most they make only $360,000 (Shs1.3b) per month.
“It’s a painful decision but we have no choice but to let some workers go,” said Mr Benjamin Cadet, one of the company directors.
“Now that we cannot operate at full capacity, it means we can only keep about 80 employees out of 450. We are losing in excess of $1.6m (Shs5.9b) per month simply because of inadequate power supply.”
“The only challenge is the discrepancy between excess electricity generated yet the distribution cannot support investors to consume electricity in bulk. This affects domestic consumers given the fact that they are forced to pay high tariffs yet those that need power in bulk so that the tariff can go down are denied the electricity they need.” Most of the affected employees are mainly from agronomist, propagation and casual departments. The technical people as well as security department have not been affected.
Daily Monitor understands that out of the minimum daily electricity consumption of 1,500KVA, government has been able to supply only 315KVA to the company. The company pays about Shs7.2m for more than 10,000 units they consume on a daily basis.
The company directors say they continue to pay higher charges for domestic consumption of Shs720m per unit because Umeme has not installed a big generator at the facility.
The State minister for Investment and Privatisation, Ms Evelyn Anite, yesterday acknowledged the electricity gap in the country and reiterated the government commitment to cut cost of manufacturing electricity to 5 cents per kilowatt.
The minister talked of a solid base for industrialisation through building and promised to study the concerns raised by Industrial Hemp (U) Ltd.
The company hopes to manufacture Oil Risin containing Dronabinol for making Marinol and syndros capsules and CBD enriched creams for various skin disorders.
Others are pharmaceutical ingredients such as Cannabinol (CBD) and Tetrahydrocannabinol (THC) with mixture of 2.7mg THC and 2.5mg CBD for Sativex drugs approved in USA, Europe and Canada.
On December 7, 2017, Uganda exported unrefined cannabis buds/ flowers to South Africa’s National Analytical Forensic Services in Pretoria. The order to Industrial Hemp (U) Ltd was valued at $10,000 (Shs37.1m). But Mr Cadet said they took a decision to export finished products instead of “donating millions of dollars” to other countries.
While the marijuana planters had indicated that in June this year they would export medical marijuana products to Canada and Germany worth Shs600b, this has not been possible to due unforeseen losses. The export date has now been shifted to either July or late August.
But sources at Industrial Hemp (U) Ltd have told Daily Monitor that the medical marijuana growers are not struggling because of the problem of inadequate electricity alone, it’s a combination of other factors.
For instance, early this month, the company harvested, packed and stored marijuana refined buds (the raw material) waiting for processing facility to be completed. The delayed arrival of purchases manufacturing machines has also affected their plans.
“Our medical cannabis facility needs a lot of electricity to enable our equipment to operate at full capacity… failure to have the needed electricity means we cannot operate at the required capacity, thus the low capacity and low income,” Mr Cadet explained and clarifying that the signed contracts have not been affected on account of a global shortage of medical cannabis.

Govt promises
The impending loss of 370 jobs at Industrial Hemp (U) Ltd in Kasese District, however, flies in the face of a presidential directive to Uganda Investment Authority (UIA) to create one million jobs annually.
On electricity outages, the President has consistently promised that government would replace old lines with new transmission wires and transformers.
Umeme spokesperson Stephen Ilungole last evening explained that the power problem at Industrial Hemp (U) Ltd was caused by the ground cables connecting the power to the factory and that Rural Electrification Agency has promised to have them replaced.
Mr Ilungole pleaded with the investor to spare workers as REA fixes the faulty line.