The Department of Agriculture, Land Reform and Rural Development has issued 1,725 hemp cultivation permits covering approximately 29,000 hectares across Gauteng, KwaZulu-Natal and the Eastern Cape since 2022.
However, permitted land does not necessarily translate into active commercial production.
Pilot projects in the Eastern Cape have shown that locally grown hemp fibre can be processed using converted cotton machinery, but significant infrastructure and investment gaps remain.
For emerging smallholders and rural co-operatives, entering the industrial hemp market requires navigating regulatory and financial requirements before a crop is harvested.
Although low-THC hemp has been declared an agricultural crop under the Plant Improvement Act, growers entering the commercial market must meet regulatory requirements, including land assessments, background checks and laboratory testing to verify that crops remain within legal THC limits.
The cost of certified seed and these upfront requirements can create significant barriers for under-capitalised businesses. The biggest challenge, however, is processing infrastructure
The missing link, decortication
Decortication is the process of separating the useful bast fibre from the woody core of the hemp stalk.
Commercial facilities require significant capital, making it difficult for individual SMEs to establish their own plants.
Without regional processing facilities near farming communities, producers may have to transport bulky, unprocessed stalks over long distances, increasing costs and reducing potential returns.
The Industrial Hemp Value Chain Development Study estimates that establishing a commercial-scale decortication plant could require between R15 million and R50 million in capital expenditure.
A joint study by the Localisation Support Fund, the Industrial Development Corporation, the dtic and the Presidency projects that South Africa’s domestic hemp market could reach R40 billion by 2040.
Irshaad Kathrada, Chief Executive Officer of the Localisation Support Fund, said capturing this value requires investment beyond primary agriculture.
“Industrial hemp represents one of the most compelling and versatile economic opportunities available to South Africa right now,” Kathrada stated.
“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.”
Kathrada said legal reform, processing infrastructure and demand must develop alongside one another.
“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 a strategic platform for reindustrialisation, rural inclusion, and South Africa’s green economic transition.”
Where SMEs can participate
If regional processing capacity expands, smaller businesses could participate at several points in the value chain.
Smallholder farmers and agricultural co-operatives could supply raw biomass through off-take agreements, while SMEs could operate regional decortication hubs as shared-user facilities.
Further opportunities could emerge for textile manufacturers, spinning mills and cut-make-trim factories producing hemp-blended yarns and garments.
Ayanda Bam, Executive Director at Zageta Solutions, said targeted intervention would be necessary to bring investment into the sector.
“But it will not happen organically. It requires deliberate, targeted and sequenced interventions,” Bam noted.
For SMEs to benefit from the projected market, industry stakeholders say support should focus on accessible processing infrastructure near farming communities.
In his 2025/26 Budget Vote, Trade, Industry and Competition Minister Parks Tau said the rollout of the National Policy on the Commercialisation of Hemp and Cannabis would be supported by “mega-aggregation schemes, dedicated hubs” and initiatives aimed at creating rural livelihoods and export revenue.
