A deal with a leading irrigation specialist in South Africa will provide Roots Sustainable Agricultural Technologies access to the country’s lucrative blueberries and cannabis sectors.
Roots Sustainable Agricultural Technologies Limited (ASX:ROO) is expanding into Africa after signing a non-binding, exclusive Letter of Intent (LOI) with irrigation specialist Cherry Irrigation SA.
Under the deal Roots will provide exclusive marketing, sales and installation rights to Cherry Irrigation for its Root Temperature Optimisation (RTZO) and Heat Exchange Probe (HEP) technology in South Africa and Namibia.
The exclusivity commitment is for three years and conditioned on an average sale in that time of no less than €1.0m (~$1.55m).
Upon sale and installation of each system, Cherry Irrigation will pay Roots a royalty at a rate to be agreed upon in the definitive agreement, anticipated in early 2022.
Both parties have agreed upon an initial purchase order of four small scale RTZO systems, which will be used as pilot installations over the coming months.
Access to lucrative blueberry, cannabis markets
The agreement marks Roots’ first entry into Africa and provides the company with a significant opportunity for entry into Southern Africa’s lucrative blueberry and cannabis markets.
The South African blueberry industry has seen exponential growth during the last five years. The area in which blueberries are planted is expected to increase 17% with most of production taking place on the Western Cape, where Cherry Irrigation is headquartered.
South Africa’s cannabis sector is expected to achieve strong growth following the formalisation of a national strategy from the Department of Agriculture, Land Reform and Rural Development to industrialise and commercialise the sector.
The strategy aims to harvest the US$1.9bn cannabis industry to potentially create as many as 25,000 jobs and attract large amounts of foreign investment.
As a leading project provider for agricultural solutions in the industry, Cherry Irrigation supplies a full range of products and services capable of supporting Roots’ expansion into these large sectors.
Roots finding solutions for climate fluctuations
Established in 2012 and based in Israel, Roots is developing and commercialising technologies to help address critical problems faced by the agriculture industry today, such as plant climate management and the shortage of water for irrigation.
The company has developed proprietary know-how and patents to optimise performance, lower installation costs, and reduce energy consumption to a minimum and bring maximum benefit to farmers.
Its patented RTZO can heat or cool crop roots as needed in one system, mitigating against temperature fluctuations, which is critical in regions where daily and seasonal temperatures can vary significantly.
The company has operations in Israel, China, Australia, the USA, South Korea and Spain.
The company installed 1,000 heat exchange probe units at the My Green Fields cannabis farm in Israel. It also expanded its partnership with California-based smart technology provider Humboldt CCTV.
Roots’ RTZO system is being integrated into Humboldt’s SmartAg product that enables growers to wirelessly monitor soil moisture, crop temperature, weather station data and environmental conditions at a grow site.
More deals expected soon
Roots CEO Boaz Wachtel said he was confident the Cherry Irrigation deal coupled with the effectiveness of the RZTO technology will act as a catalyst for broader product uptake.
“Securing our first LOI and sales into Africa is a major step for our company and highlights the applicability of our products to farmers and growers globally,” Wachtel said.
“We expect our RZTO and HEP technologies to be well received, specifically in a region experiencing large growth in segments in which our product can considerably increase crop yield and crop quality.”
He said with an increased level of interest for innovative and sustainable agricultural solutions worldwide, Roots continues to engage in discussions with several potential collaborators.
“Discussions are well progressed with numerous other parties following an increased level of demand for technologies providing sustainable agricultural practices,” he said.
“Roots remains in the box seat to be able to establish our presence in further key markets as this trend continues to accelerate.”
This article was developed in collaboration with Roots Sustainable Agricultural Technologies, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.