South Africa has a potential domestic industrial hemp market worth R40bn by 2040, according to a landmark study released by the Localization Support Fund (LSF) in partnership with the Presidency, Industrial Development Corporation (IDC) and the Department of Trade, Industry and Competition (DTC).
The report outlines a clear pathway for industrial hemp to support reindustrialization, export growth, decarbonization and inclusive rural economic growth.
“Industrial hemp represents one of the most compelling and versatile economic opportunities available to South Africa at this time. Every part of the plant is marketable – from the grains for high-nutrition foods to the stalks for carbon-negative building materials – and with domestic demand alone projected to reach R40bn by 2040, the scale of the prize is significant,” said Irshad Kathrada, CEO of LSF.
“But none of that potential translates into reality without a deliberate, coherent industrial strategy. 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 should be treated as such.”
South Africa is poised to capture global cannabis demand
Globally, the hemp market is projected to grow from US$10 billion in 2025 to US$37 billion by 2032. South Africa's diverse agro-ecological zones and counter-seasonal production cycles enable year-round supply, while established manufacturing clusters in automotive, textiles, pulp and paper and food processing provide ready demand pathways for hemp-derived inputs.
Garth Strachan, Technical Advisor to the PMO Presidency and IDC, said, “This high quality and important study provides a clear evidence-based roadmap for coordinated action across government, industry and investment institutions to secure critical economic objectives, most importantly to enable commercially viable investment and job creation.”
Since 2022, South Africa has issued 1,725 cultivation permits covering 29,000 hectares, mostly in Gauteng, KwaZulu-Natal and the Eastern Cape. However, the study highlights that the lack of industrial-scale processing infrastructure – particularly primary processing – and regulatory fragmentation remain major barriers to scaling up the sector.
Five Priority Industrial Pathways
The study identifies five areas for early development:
1. Food and Beverages – Grain-based products such as hemp milk, flour and oil.
2. Personal Care – Creams, serums and health products derived from hempseed oil.
3. Pulp and paper – using underutilized straw biomass for biodegradable packaging and cellulose content.
4. Textiles – non-wovens from dual-purpose cereal crops and technical applications.
5. Building and construction – Materials such as hempcrete and insulation from hemp herds account for about 65% of the stalk's volume.
These pathways were chosen for strong and growing demand, proven or adaptable technology and realistic possibilities for localization within South Africa's existing industrial footprint.
Need for coordinated action for development of the area
“Realizing the economic promise of South African cannabis will require not just the removal of regulatory barriers, but a deliberate minimum action programme,” the report said.
This includes providing early-stage financing to support processing infrastructure, supporting first-mover companies to build technical expertise, and designing aggregation models for farmers, processors, and manufacturers to operate at viable scale. Dedicated project preparation capacity in both public and private institutions is also required to convert the potential into bankable investment opportunities.
“We are excited by the prospects of this study that will provide some direction for large-scale industrial activity and begin to mobilize the capital needed to finance the sector. However, this will not happen systematically. It requires deliberate, targeted and sequenced interventions enabled by the state and implemented by its partners,” said M. Ayanda Bam, Executive Director of Zegeta Solutions.
Clarifying regulation and policy
“This study is a game changer for South Africa's cannabis sector, providing clear insight into a complex and evolving regulatory landscape. It helps illuminate the legal and policy environment while highlighting the true economic potential of cannabis. Importantly, it reinforces that while hemp and cannabis are the same plant, regulation is largely determined by THC levels,” said John Jeffery, project manager of the Hemp and Cannabis Masterplan.
The study provides a basis for informed policy development, industry development and investment in agriculture, manufacturing and research, positioning South Africa as a potential global hub for industrial hemp.
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