The study suggests that as a later entrant to the global hemp market, South Africa could avoid many of the costly early-stage mistakes made by pioneer countries by building competitive value chains from the outset that align with international standards.
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South Africa could unlock a domestic industrial hemp market worth as much as R40 billion by 2040 if the country moves decisively to develop the sector, according to a new study.
The landmark industrialisation study was released by the Localisation Support Fund (LSF) in partnership with the Presidency, the Industrial Development Corporation (IDC) and the Department of Trade, Industry and Competition (the dtic).
The study outlines how hemp could become a significant driver of reindustrialisation, export growth, rural development and decarbonisation in South Africa, but warns that policy reform, financing and infrastructure investment will be essential to realise that potential.
Commissioned by the LSF and undertaken by Zageta Solutions in collaboration with the Development Policy Research Unit (DPRU) at the University of Cape Town, the research builds on the objectives of the National Cannabis Master Plan by translating policy ambitions for hemp into practical industry development actions.
LSF CEO Irshaad Kathrada said the findings demonstrate that hemp could become a strategic platform for South Africa’s green industrial transition.
“Industrial hemp represents one of the most compelling and versatile economic opportunities available to South Africa right now,” Kathrada said.
“With domestic demand alone projected to reach R40bn by 2040, the scale of the prize is significant. This study makes clear that legal reform, processing infrastructure, and demand-led value chain development must advance together, as part of a coordinated national programme.”
Globally, the hemp market is expanding rapidly. The study notes that the industry is projected to grow from about $10bn in 2025 to roughly $37bn by 2032.
South Africa’s diverse agro-ecological zones and counter-seasonal production cycle position it well to supply global markets throughout the year, particularly when Northern Hemisphere producers are out of season.
Researchers also argue that South Africa has a structural advantage because many of the downstream industries that could absorb hemp inputs already exist.
Manufacturing clusters in sectors such as automotive production, textiles, pulp and paper, and food processing could provide immediate demand pathways for hemp-derived products, reducing barriers to scaling the sector.
The study suggests that as a later entrant to the global hemp market, South Africa could avoid many of the costly early-stage mistakes made by pioneer countries by building competitive value chains from the outset that align with international standards.
Since 2022, South Africa has issued 1,725 hemp permits covering about 29,000 hectares of land, primarily in Gauteng, KwaZulu-Natal and the Eastern Cape. While this provides a base for expansion, the report highlights a major bottleneck: the lack of industrial-scale processing infrastructure.
Primary processing facilities, which convert hemp plants into usable fibre, grain and biomass, are critical to the sector’s viability. Without them, farmers struggle to access reliable markets, limiting the incentive to scale production.
The study also highlights regulatory fragmentation as a continuing constraint, particularly the need to clearly distinguish industrial hemp from intoxicating cannabis in legislation to reduce investor uncertainty.
Researchers identified five priority industrial pathways that could anchor early development of the sector. The most immediately accessible is the food and beverage segment, where products such as hemp milk, flour and edible oils can integrate relatively easily into existing oilseed and food-processing industries.
Personal care products — including cosmetics and wellness goods derived from hempseed oil — present another low-barrier opportunity, especially for small and medium-sized enterprises.
A third opportunity lies in pulp and paper production, where hemp straw biomass could be used to produce biodegradable packaging and cellulose-based materials, building on technology already used in South Africa’s forestry sector.
Two additional sectors offer longer-term industrial potential. Textile manufacturing is one of the fastest-growing global hemp markets and could support non-woven fabrics and technical fibre applications.
The building and construction sector also presents significant opportunity, particularly through materials such as hempcrete and insulation products that support global decarbonisation goals.
The study finds that large-scale, mechanised farming operations offer the strongest economic returns, while smaller labour-intensive models face profitability challenges due to harvesting and processing costs.
To unlock the sector, the report recommends establishing concessional early-stage financing to support processing facilities, backing first-mover companies building expertise across the value chain, and developing agricultural and industrial clusters that bring farmers, processors and manufacturers together at scale.
Without such coordinated interventions, researchers warn that the current “chicken-and-egg” dynamic between growers and processors could continue to hold back the industry’s development.
John Jeffery, project manager of the Hemp and Cannabis Masterplan, said the study helps demystify the legal and policy environment while highlighting the real economic potential of hemp.
“Importantly, it reinforces that hemp and cannabis are the same plant, with regulation largely determined by THC levels,” Jeffery said.
“By clarifying these distinctions, the study provides a valuable foundation for informed policy development and industry growth. It is a critical step toward unlocking opportunities across agriculture, manufacturing, and research in this emerging sector.”
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