State can ignite SA’s film industry

2013-05-12 14:00

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A new National Film and Video Foundation (NFVF) report is pushing for more, and larger, government incentives to make local films and to fix the broken distribution system that makes the South African industry an uncertain commercial prospect.

The new “baseline report” commissioned from Deloitte and released on Friday indicates that the industry more than pays back the existing department of trade and industry film incentive.

The SA Revenue Service provides something in the region of R250?million in rebates to film makers each year, but gets back about R670?million in taxes, the report estimates.

This new proof of handsome returns on government spending is being used to make a pointed case for more financial incentives. This is despite finding the industry to still be relatively modest in terms of gross domestic product and employment.

The foundation’s report proposes that two new separate incentive schemes be created to cater specifically for low-budget fiction films and documentaries – covering the potentially prolific parts of the industry that largely fall outside the trade and industry scheme.

The funding for initial development, including scriptwriting and the distribution of films, should be beefed up while “alternative distribution mechanisms” should be funded as well, it says.

While few of the report’s findings around the industry’s challenges will be news to the industry, the report seems to show that the foundation is seriously appealing to the department to fund their solutions.

Making a hard economic case for more state support is crucial, as film incentives have a somewhat chequered history in South Africa.

The so-called Section 24F incentives, available in the 1980s, were routinely abused by “film producers” putting money into hopeless projects that never saw the screen, just to get the tax benefits.

The major problems identified by the report include the extremely low levels of spending on crucial early development and the even more crucial distribution sections of the film value chain.

There are very few avenues for upfront film funding and even fewer that leave film makers with any intellectual property, and thus the ability to earn an income from the finished product, says the report.

The existing film incentive offers film makers 25% to 35% of their local spend back on a local film project and 20% for spending on foreign films in the often hyped-up facilitation industry. On the one hand, the local incentive is too hard to get and, on the other, the international incentive is too low to really compete with schemes in other nations, the report suggests.

To qualify for the film incentive, local film makers need to raise the first 25% of their budget. If 50% of the budget can be secured upfront, the Industrial Development Corporation also offers funding.

Getting this much funding upfront is a near-complete barrier for many, leaving projects stillborn – largely because the incentive only applies to projects with budgets of more than R2.5?million.

A broken distribution system

If local films do get made, their prospects for making money are pretty bleak. Most major distribution channels are dead ends, which leads to “many high-quality films not recouping their costs”, says the NFVF report.

»?Major problems include a small cinema-going population, further put off by high prices, costly exhibitors, a preponderance of big foreign fare and skeletal marketing budgets.

»?DVD sales are declining as online alternatives grow and piracy thrives.

The report takes a pragmatic view of piracy, noting that “piracy will continue until legitimate DVDs or films on USB sticks are sold at prices that compete with pirates”. Piracy will also be insuperable unless films are legitimately sold “in the same diverse locations as pirate DVDs”, it says.

»?The report does praise the burgeoning, but constrained, low-budget industry which includes’s Ekasi films, M-Net’s Bubblegum Films and the innovations of Chicco Twala, who uses pirate-like methods to sell self-produced films.

»?The major revenue stream for local film production is sales to broadcasters, although in South Africa that largely means selling to the dysfunctional SABC.

According to the report, South African film makers struggle to reach foreign markets and “a permanent operation with the sole objective of marketing and selling South African films abroad could make a difference”.

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