The study, commissioned by the Localisation Support Fund (LSF) with the Presidency, the Industrial Development Corporation (IDC) and the Department of Trade, Industry and Competition (dtic), outlines a roadmap for turning hemp into a new industrial input across multiple sectors. The work builds on policy ambitions laid out under South Africa’s 2021 National Cannabis Master Plan, which set out a strategy for hemp and marijuana development.
“Industrial hemp represents a strategic opportunity to diversify South Africa’s industrial base, deepen manufacturing value chains and strengthen rural economies,” said Irshaad Kathrada, chief executive of the Localisation Support Fund.
But Kathrada said building that value chain will require deliberate coordination among government, industry and finance.
Market outlook
The report’s authors said the sector could eventually support domestic manufacturing, rural development and participation in the global bioeconomy — but only if South Africa resolves regulatory fragmentation, builds processing capacity and develops well-organized supply chains.
The report estimates South Africa’s domestic hemp market could reach roughly R40 billion (about $2.5 billion) by 2040. However, the authors stress that the projection is based on limited data and should be treated as indicative rather than predictive.
Global figures cited in the report carry similar caveats. The global hemp economy is projected to expand from roughly $10 billion in 2025 to about $37 billion by 2032, but the study acknowledges that reliable industry data remain fragmented and inconsistent across jurisdictions.
For investors and operators, the message is clear: the sector’s theoretical demand potential is large, but the underlying data supporting those projections are still developing.
Regulatory cleanup
The report repeatedly returns to regulation as the single most immediate barrier to growth.
Industrial hemp remains entangled with broader cannabis legislation in South Africa. The study recommends that hemp be explicitly removed from the Drugs and Drug Trafficking Act and regulated under a separate industrial framework.
Garth Strachan, a technical consultant working with the Presidency and the IDC, said regulatory clarity will be essential for building confidence among investors and industrial partners.
Without a clear legal separation between hemp and intoxicating cannabis, he said, companies face uncertainty around licensing, compliance and product development. Earlier industry discussions have similarly highlighted the need for policy clarity, capital access and market development before the sector can expand meaningfully.
The report argues that aligning policies across agriculture, health, trade and industrial departments will be necessary before large-scale investment in processing infrastructure can proceed.
The Emergence of South Africa’s Hemp Sector: Developments, Strategies, and Prospects
Demand pathways
Rather than promoting hemp as a single industry, the study identifies five industrial pathways where early development efforts should concentrate.
Three of those pathways offer relatively near-term entry points.
Food and beverages are highlighted as an accessible starting point because hemp grain products such as oils, flours and plant-based beverages can integrate into existing oilseed processing systems.
Personal care products based on hempseed oil — including cosmetics and wellness goods — are also viewed as low-barrier manufacturing opportunities that could support small and medium enterprises.
Pulp and paper applications could absorb hemp straw biomass into biodegradable packaging and cellulose products using technologies already established in South Africa’s forestry sector.
Two additional pathways point toward longer-term industrial scale.
General textiles could eventually use hemp fiber in nonwoven materials and technical fabrics, while building and construction applications such as hempcrete and insulation could absorb large volumes of hemp hurd from stalk processing. Early projects have already demonstrated hemp’s potential in building materials in South Africa.
Farm economics
The report emphasizes that processing infrastructure will ultimately determine whether the sector scales.
Large-scale decortication facilities — which separate hemp stalks into fiber and hurd — are described as the missing industrial link between farms and manufacturing. Without those facilities, farmers have limited options for selling harvested biomass, and manufacturers cannot secure reliable inputs.
South Africa has already begun building a cultivation base. Since 2022, the government has issued 1,725 hemp cultivation permits covering roughly 29,000 hectares in Gauteng, KwaZulu-Natal and the Eastern Cape.
The study says this provides a foundation for scaling production. But it also warns that farm economics remain highly sensitive to processing access and reliable off-take markets. Mechanized farming models operating at scale show the strongest financial returns in the report’s analysis.
Cluster strategy
Smaller, labor-intensive operations struggle to achieve profitability because harvesting and processing costs remain high without nearby industrial facilities. Earlier reporting has also noted concerns that smaller farmers risk being left behind as the sector evolves.
To address those constraints, the report recommends a cluster-based development model linking farms, processing plants and manufacturing hubs in specific regions. Potential clusters are identified in areas such as the Eastern Cape and KwaZulu-Natal, where agricultural production and industrial capacity already overlap.
The study also proposes a blended-finance vehicle to support early infrastructure investment and help crowd in private capital.
