Medical cannabis company Cann Global (ASX: CGB) has shouldered into South Africa via a heads of agreement with Koegas Medicinal Herbs (Pty) Ltd to establish a joint venture medicinal cannabis production and distribution company in the region.
To facilitate the joint venture, Cann will establish a local wholly-owned subsidiary Cann Global South Africa, which it plans to float on the ASX.
Cann will own 70% of the joint venture and will develop a medicinal cannabis and hemp business plan and funding parameters for the duo to work within.
Meanwhile, Koegas will apply for four relevant licences from South Africa’s Medicines Control Council.
Koegas will also managing all necessary local personnel, logistics, and government support, plus any other necessary resources on a transparent cost basis.
Cann will provide its technical, regulatory and operational expertise, in addition to its intellectual property for plant and product development.
In consideration for its 70% stake in the joint venture, Cann will issue Koegas 10 million fully paid ordinary shares.
The duo plans to sell all products produced in South Africa and other global markets.
Africa a ‘huge’ emerging medicinal cannabis market
The African continent is believed to be a huge emerging market for the medicinal cannabis industry.
Cann stated it was of “strategic importance” to establish a base in Africa to distribute its existing and future products.
The joint venture plans to establish four locations for its operations in South Africa, with the country offering access to “significant land packages” totalling 1,500 acres with access to power and irrigation for both indoor and outdoor growing.
According to Cann, Koegas has well established connections in the agricultural and regulatory environments to ensure approvals and development occurs in a “timely manner”.
“The board is confident that this newly established joint venture in one of the larger emerging markets for cannabis globally, on the African content, in a strong economic and regulatory framework in South Africa, will be able to establish a strong foundation to generate significant revenues of Cann,” the company stated.
This latest joint venture builds on Cann’s existing network in Australia, Asia, North America and Israel.
Cann’s share shot up more than 15% to trade at $0.015 mid-morning.