4 March 2026 – Johannesburg: A domestic industrial hemp market opportunity valued at R40 billion by 2040 is within South Africa’s reach – but only with the right industry development and policy support. That is the headline finding of a landmark industrialisation study published today 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 maps a credible path through which hemp industrialisation could become a meaningful driver of reindustrialisation, diversification, decarbonisation, export growth, and inclusive rural economic development across the country.

Commissioned by the LSF and undertaken by Zageta Solutions together with the Development Policy Research Unit (DPRU) at the University of Cape Town, the study builds on previous work and aligns with the objectives of the National Cannabis Master Plan – translating its policy ambitions for industrial hemp into practical, implementable industry actions. In doing so, it establishes a substantive research base from which the development of the sector can meaningfully advance.

Globally, the hemp market is projected to grow from approximately US$10 billion in 2025 to US$37 billion by 2032 – and South Africa is well-positioned to capture a meaningful share of that expansion. Diverse agro-ecological zones and a counter-seasonal production cycle mean South Africa can supply global markets year-round, filling gaps left by Northern Hemisphere producers. Critically, it does not need to build from scratch – established manufacturing clusters in automotive, textiles, pulp and paper, and food processing provide ready-made demand pathways for hemp-derived inputs, lowering the barriers to commercial scale-up.

As a later entrant, South Africa can also bypass the costly trial-and-error phase that slowed early adopters, instead designing value chains that are competitive and standards-aligned from inception. When combined with South Africa’s pivotal role as a continental trade gateway under AfCFTA, and the strong alignment between hemp industrialisation and national goals around decarbonization, rural economic revival, and social inclusion, the case for South Africa as a future global hemp hub is compelling and credible.

Since 2022, South Africa has issued a total of 1,725 permits, granting legal cultivation rights across 29,000 hectares of land, primarily in Gauteng, KwaZulu-Natal, and the Eastern Cape – providing a strong foundation for scaling. The study however cautions that the absence of industrial-scale processing infrastructure – particularly in primary processing represents the most critical bottleneck to sector growth. Additionally, regulatory fragmentation – particularly the need to clearly separate industrial hemp from intoxicating cannabis in legislation -continues to constrain investment and industry development.

The study identifies five priority industrial pathways where South Africa’s hemp sector should concentrate its early development efforts. Food and beverages stands out as the most immediately accessible, with grain-based products such as hemp milk, flour, and edible oils integrating readily into existing oilseed and food-processing platforms. Personal care – encompassing hempseed oil-derived creams, serums, and wellness products – offers similarly low entry barriers and strong alignment with the country’s existing manufacturing base, making it particularly attractive for SMMEs. Pulp and paper, meanwhile, presents a strategic opportunity to absorb underutilised straw biomass through biodegradable packaging and cellulose-based materials, leveraging technology already proven in South Africa’s established forestry sector.

The remaining two priority pathways point toward longer-term industrial scale. General textiles – one of the fastest-growing hemp segments globally – is well-suited to non-woven and technical applications that can utilise fibre from dual-purpose grain crops without demanding the highest processing standards. Building and construction, driven by global decarbonisation imperatives, focuses on materials like hempcrete and insulation, with hemp hurds accounting for roughly 65% of the stalk offering substantial volumetric supply potential. Together, these five pathways were selected because they share a common profile: strong and growing demand, proven or adaptable technology, and realistic prospects for localisation within South Africa’s existing industrial footprint.

Unit economic analysis confirms that mechanised, scale-based farming operations demonstrate the strongest returns, while smaller, labour-intensive models struggle to achieve profitability due to harvesting and processing constraints. Farmer returns are highly sensitive to access to reliable off-take markets and nearby processing infrastructure, reinforcing the need for coordinated value chain development rather than a purely supply-led approach.

Realising the economic promise of South African hemp – which the study confirms is real on both the cultivation and processing sides of the value chain – will require a deliberate minimum programme of action, not simply the lifting of regulatory barriers. At its core, this means establishing a concessional early-stage financing instrument to make the entry costs of processing infrastructure manageable and to crowd in private capital; identifying and actively supporting first-mover companies that are building the tacit and technical knowledge the sector needs across the full value chain, from seed selection and agronomic practice through to decortication and product development; and designing aggregation and clustering models that allow farmers, processors, and downstream manufacturers to develop in proximity and at viable scale. Underpinning all of this is the need for dedicated project preparation capacity – in both public and private institutions – capable of translating the sector’s potential into bankable, investible propositions. Without this combination of smart finance, early-mover support, and coordinated value chain construction, the chicken-and-egg dynamic between farmers and processors will persist, and the sector’s genuine commercial viability will remain latent rather than realised.

Speaking at the launch of the report, LSF CEO Irshaad Kathrada remarked: “Industrial hemp represents one of the most compelling and versatile economic opportunities available to South Africa right now. Every part of the plant is marketable – from grain for high-nutrition foods to stalks for carbon-negative construction materials – and with domestic demand alone projected to reach R40 billion by 2040, the scale of the prize is significant. What makes this particularly exciting is that South Africa doesn’t need to start from scratch. We have the manufacturing base, the agro-ecological diversity, and the research foundation to compete globally. But none of that potential convert into reality without a deliberate, coherent industrial strategy. 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. Hemp is not a niche agricultural curiosity – it is a strategic platform for reindustrialisation, rural inclusion, and South Africa’s green economic transition, and it deserves to be treated as such”.

Garth Strachan, Technical consultant to the PMO Presidency and the IDC added: “This high quality and important study provides a clear evidence-based roadmap for coordinated action across government, industry, and investment institutions to secure important economic objectives, most importantly to enable commercially viable investment and employment creation.”

M. Ayanda Bam, Executive Director of Zageta Solutions added: “We are excited at the prospects of this study providing some direction for scaled industrial activity and to begin crowding in necessary capital to finance the sector. This this will not happen organically, however. It requires deliberate, targeted, and sequenced interventions enabled by the state and implemented by its partners.”

John Jeffery, Project Manager of the Hemp and Cannibas Masterplan added: “This study is a game changer for South Africa’s hemp sector, offering clear insight into a complex and evolving regulatory landscape. It 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. 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.”