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), commissioned a landmark study to assess the feasibility of building a competitive industrial hemp sector in South Africa. Conducted by Zageta Solutions together with the Development Policy Research Unit (DPRU) at the University of Cape Town (UCT), 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.
Market Opportunity and Strategic Context
The research identifies a domestic market potential valued at up to R40 billion by 2040. Realising this opportunity would support South Africa’s reindustrialisation agenda, contribute to decarbonisation, expand export growth, and create tangible pathways for inclusive rural economic development. Globally, the hemp economy is projected to grow rapidly, from approximately US$10 billion in 2025 to US$37 billion by 2032. South Africa’s counter-seasonal production, established industrial base, and growing domestic demand position the country to capture a meaningful share of this expansion.
Demand Pathways
The study identifies five priority industrial pathways where South Africa's hemp sector should concentrate its early development efforts. These pathways highlight that hemp is not simply a crop but a versatile industrial input capable of supporting multiple sectors simultaneously and include:
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.
Current Foundations
Since 2022, South Africa has issued 1 725 cultivation permits, covering 29 000 hectares of land across Gauteng, KwaZulu-Natal, and the Eastern Cape. This provides a strong base for scaling cultivation. However, the study emphasises that farmer returns are highly sensitive to reliable off-take markets and proximity to processing facilities. Mechanised, scale-based farming models demonstrate the strongest returns, while smaller, labour-intensive operations struggle to achieve profitability due to harvesting and processing constraints.
Pathways to Scale
The study concludes that hemp localisation at scale is feasible, but only if demand commitments, firm-level improvements, and enabling policy tools are aligned. Key enablers include:
Demand led value chain development accompanying regulatory reform.
End market requirements that drive upstream decisions - from seed selection through to processing specifications.
Resolution of the “missing middle” through building industrial scale decortication capacity to convert raw hemp straw into farming; foods; feeds; fibres; fractions; and fuels (5F+F).
Anchoring processing infrastructure in spatial clusters with focus on high potential regions such as the Eastern Cape and KwaZulu Natal.
Establishing blended finance facilities to support infrastructure investment and crowd in private capital.
Shifting farmer development models by moving beyond permitting to competitiveness, with offtake arrangements, working capital, and agronomic support.
Aligning the national Research & Development strategy, with clear technical standards and a phased roadmap toward global competitiveness.
Recommended Actions
To unlock the R40 billion opportunity, the study recommends a clear “Minimum Programme of Action” which includes:
The unequivocal removal of hemp from the Drugs Act; legally separating industrial hemp from intoxicating cannabis.
A dedicated blended finance vehicle that bridges infrastructure gaps, especially in primary processing.
Demand stimulation through state procurement anchoring offtake in textiles and apparel.
Spatial clustering of production and processing through building regional hubs and supporting smallholder aggregation models.
Releasing agronomic trial data, making public research findings accessible to farmers and processors.
Updating hemp product classifications and leverage the African Continental Free Trade Area (AfCFTA) to position South Africa as a regional midstream processing hub.
Industrial hemp represents a strategic opportunity to diversify South Africa’s industrial base, deepen manufacturing value chains, and strengthen rural economies, while positioning the country within the growing global bioeconomy. Success will require determined, coordinated action by all stakeholders to address regulatory fragmentation, invest in processing infrastructure, and establish regional clusters.