South Africa Market Research

South African Audio Visual Industry

The South African entertainment industry is comprised of the broadcasting, cinematic, music and interactive industries. The statistical data relating to the film industry is notoriously poor. South Africa last gathered comprehensive figures in 1997 when a report commissioned by Department of Arts, Culture, Science and Technology estimated that the South African entrainment industry was worth R 7.4 billion. Of this figure, the film and television industry was worth R5.8 billion and employed some 20,525. This figure has increased to an estimated 30,000 people. Further jobs have been stimulated in transport, catering and hospitality industries. A large percentage of employment in the film industry falls into the high and medium skilled category. The industry also contributes to employment growth in the low skills sector.

 

Box Office

The local box office is dominated by foreign films. A few South African films have made their mark helped by the international recognition of socio-political films like the Oscar winner “Tsotsi” and “Yesterday” which have raised the profile and perceptions of local films.  There is a lack of variety of content and South African youth find TV soaps more relevant than local films as they deal with current issues while local films are perceived to be focused on the past.Perceived poor quality, editing and lack of special effects as well as  poor acting and use of the “same faces” coupled with insufficient marketing of local films makes this diffuclt.  But there exists potential strong demand from local distributors for locally-made film if they show greater variety, quality and relevance.

 

Cinema Attendance

In South Africa, cinema attendance is characterised by areas of growth, stagnation or decline. But there is demand for local filmsas the overall attendance is on the rise – 4.5% between 2002 and 2003 and further 5% between 2005 and 2006.Cinema attendance is growing in previously underserviced areas. This is because cinemas have become more accessible due toCompetitive pricing and opening of new cinemas.In the better serviced areas of the country however, the trend is towards stagnation. Countrywide, new content delivery channels are booming due to declining prices of DVDs, computers and cell phones, giving local cinemas some real competition for audiences.

 

Government support for the audio-visual sectors

The government has been a proactive facilitator of the audio-visual industry and has established a number government-related and privately funded agencies at national, regional and local levels to support the industry including:  National Film Video Foundation at national level, Regional Film Commissions including Gauteng Film Commission, Cape Film Commission and Durban Film Office, Eastern Cape Arts and Culture and Mpumalanga Arts and Culture.

 

At the local level Departments in Municipalities are supported by Department of Arts and Culture, Department of Trade and Industry, South African Revenue Service, Media, Advertising, Printing, Publishing and Packaging Sector, Education and Training Authority – MAPPP-SETA, National Arts Council of South Africa, South Africa Scriptwriters Association, Independent Producers Association and Commercial Producers Organisation etc.

 

Key Strategies

In the last five years, working through these agencies, the government has invested in developing a coherent framework with a renewed focus on strategies for the sustainable growth of the audio-visual industries. These strategies have identified the key challenges facing the South African audio visual industries and ways in which they can be met through private and public partnerships including with Skills development, Audience development, Access to finance, Improving coordination between key institutions, Obtaining critical industry information and Transformation.They provide an ongoing analysis of the South African audio visual industry to the national and international audiences. They focus on creating framework for the national industry growth and development based on learning from international best practice to enhance economic growth and development, increase competitiveness, exports and investment and achieve transformation in the industry. Key stratgies published over the last decade include:

  • ¡ Cultural Industries Growth Strategy, 1998.
  • ¡ Industrial Development Corporation Report, 2000.
  • ¡ National Value Charter.
  • ¡ Strategy for the Development of the Content Industries, 2003.
  • ¡ Film and Electronic Media Sector Skills Plan, 2004.
  • ¡ Western Cape Province Micro Economic Development Strategy: Film Sector, 2005.
  • ¡ The Department of Trade and Industry Draft Sector Development Plan: Film and Television, 2005.

 

Audio-Visual Hubs for Foreign Productions

The two main streams of the South African audio-visual industry are the facilitation and provision of logistical and technical services for foreign productions and the local production of South African commercials, documentaries and feature films. The government is investing heavily in creating the infrastructure that will make South Africa an attractive destination for foreign film, television and commercials production.

 

Initiatives include the establishment of Regional Film Commissions.South Africa’s film and television industry is located around the two major cities of Johannesburg in Gauteng Province and Cape Town in the Western Cape and the government has established audio-visual hubs in these two cities. The primary value proposition of these hubs is to market their regions as locations of choice to the local and international audio-visual industry.

 

The Cape Film Commission

The Cape Film Commission is mandated to promote Cape Town and the Western Cape region to the entertainment industry as a world class production destination. The Cape Film Commission was launched in 2001 by the City of Cape Town and the Provincial Government of the Western Cape. Its strategic objectives are to position Cape Town as a globally competitive film City, thereby boosting tourism, job creation and the development of core skills.The aim is to increase the Cape’s global film making share through key activities including: Facilitating and coordinating on-location filming in both the City and the Province. The assembly and management of all information that affects and influences film making in the region – from visas, immigration and crew rates to permits and permit management.Maintaining communication with neighbourhood and business organisations so as to mitigate any negative impacts associated with filming.Promoting the engagement of large numbers of professionals from disadvantaged backgrounds into the film industry. Helping toincrease access to the industry for all “Capetonians” and provide information on funding opportunities for training and film projects in the region.

 

Durban Film Office

Similarly, the Durban Film Office has a mandate to promote its region as a world class production destination and attain 3% of the global film making share by 2008. The Durban Film Office was launched in 2003 by Ethekwini Municipality.Its strategic objectives are to position Durban as a globally competitive film city, thereby boosting tourism, job creation and the development of core skills and SMME’s.

 

Other Regional Hubs

There are also several other emerging hubs in South Africa, which is evidence of the growth potential of the local audio-visual industry including The Mpumalanga Province which  is in the process of setting up a Film Office / Commission through its Arts and Culture department based on a detailed research and strategic plan that has been developed. The Eastern Cape Province has completed a study to set up a film office under the Arts and Culture Department. In addition each of the 7 districts in the province will have a film service centre at municipality level which will report into the provincial film office.

 

Quality Technical Infrastructure

South Africa has a well developed Technical Infrastructure and a variety of small to medium-sized fully equipped studio spaces providing the state of the art technical facilities and equipment that are ideal for commercials and low budget films. The recently opened Cape Town Dreamworld Film Complex facilities include four equipped soundstages, four backlots and premises for production, post-production and supply companies. The Dreamworld project has opened up opportunities for both local and international filmmakers as it is comparable to international standards.

 

Public Infrastructure

South Africa has well-developed public infrastructure with modern facilities and services available in all major centres.South Africa has a relatively advanced telecommunication industry with one fixed line operator, three cellular network operators and international links fed via submarine cable and satellite networks. Upgrading of national broadcasting infrastructure from analogue to digital at an estimated cost of R2bn will eventually lead to greater efficiencies in the sector and enhance new content delivery channels. Transportation compares favourably with first world countries – excellent road, rail, sea and air travel services. South Africa has 3 international airports linking it to more than 59 cities around the world. Major public and private hospitals have outpatient and casualty facilities for all health care.

Physical Environment

South Africa’s diverse physical environment makes it an attractive location with 14 hours of sunlight during summer months and weather and seasons that alternate with Europe and North America. Gauteng offers high density urban infrastructure and architecture which can double for New York, LA and European cities. It has and is in close proximity to a variety of scenery. Similarly Cape Town offers a variety of scenery and architecture while Durban is ideal for tropical settings and Mpumalanga has attractive nature reserves.It is within the same time zone as most of Europe and South Africa has become afavouredlocation for filmmakers keen tocapitaliseon its natural beauty.

 

BusinessEnvironment

South Africa has an internationally recognised comprehensive and progressive legal framework. The business environment in South Africa is generally perceived to be supportive of businesses and is conducive for growth. Most of the major global financial institutions are represented in South Africa e.g. Barclays Bank, Standard Bank, HSBC. Competitive insurance services are available e.g. Lloyds, Hollard, AIG, Lion of Africa. There is corporate governance and South Africa’s business efficiency has climbed up two places from a ranking of 40 in 2005 to 38 in 2006. This means that the country is improving its innovation, profitability and accountability levels. The government has made improving safety and security a key focus area.

 

Primary Industry Players

The South African audio visual industry is dominated by a core group of conglomerates.Primedia, one of South Africa’s biggest media companies, spans a number of different divisions and is listed on the Johannesburg Stock Exchange. It includes companies like CineMark and Ster-Kinekor.

 

Johnnic Communications is also listed and owns significant shares of Nu Metro and IMAX Theatres. It controls numerous companies that produce and distribute DVDs and videos, and has significant shares in M-Net. Sasani Limited, previously a dominant player in the post-production arena, has recently sold off the majority of its assets. It still has interests in a number of film-related companies however. These include: Sasani Studios Johannesburg, ZSE TV and the Johannesburg Movie Camera Company.

 

In the post-production field, the Refinery is growing rapidly. Apart from its substantial post-production network, it recently purchased Sasani Studios Cape Town, the Video Lab Group and Chris Fellows Sound Studios from Sasani. The industry is further represented by numerous employer organisations and other interested parties.

 

Service Companies

South Africa has about 50 successful local facilitating producers into the country.  South Africa has diverse and attractive locations that are sought after by film and commercials producers worldwide.Local equipment, facilities, services and crew are rated amongst the best in the world.The cost of filming in South Africa is relatively cheap compared to developed countries, such as in the European Union. This cost advantage is spread across the value chain. It is estimated that production costs in South Africa are 60% of USA costs. A 2002 study shows that South African crew rates are 16.9% of that of American crews. Prices in ancillary industries e.g. hotels, restaurants, airways and car rental are competitive.

 

Finance

Funding Incentives

There are a number of commercial and government organisations offering film production financing in South Africa. Funding is potentially a major growth driver as it helps attract industry players to the market.Bank financing – e.g. Rand Merchant Bank provides funding capped at 30% of production budget. Industrial Development Corporation -IDC, provides equity investment; commercial loans and venture loans which have been accessed by a number of foreign film productions form the UK, Canada, USA and other Europeancountries. Thegovernment agency, National Film Video Foundation – NFVF, also provides education and training, development, production, marketing and distribution. The government provides support for the funding of skills training initiatives and sponsorships. It is also possible to raise private equity for certain film projects with international cast and distribution from individual private investors in South Africa.

 

Rebate

South Africa’s Large Budget Film and TV Production Rebate is the prime investment incentive available to both foreign and local big budget producers. Under the Large Budget Film and TV scheme, eligible applicant are rebated a sum totaling 15% for foreign productions or 25% for qualifying South African productions, including official co-productions of the qualifying South African production expenditure that an applicant has spent on an eligible film production. The maximum rebate for a project is R10 million. The rebate scheme tends to be inaccessible to most local producers as minimum spend production expenditure is R25 million. Another funding incentive is the Section 24F of the Income Tax Act which enables any activity in the development of a film project to be tax deferrable so as to attract investment. There are further DTI rebates and subsidies for international travel to facilitate South Africa manufacturers including filmmakers to travel globally to attract funding for projects

 

Co-Production Treaties

South Africa has also signed a number of co-production treaties to support economic and cultural exchange, including with UK and Canada, enabling productions from participating countries to apply for benefits fromprogrammesof assistance from both countries. Other incentives are available to support the industry in South Africa such as the Skills Development Fund where the Employers can claim back the Skills Development Levy if they provide training that is MAPPP-SETA accredited.

There have been initiatives to reduce bureaucracy and inconsistent application of rules such asthe City of Cape Town has abolished film location tariffs on publicly owned Council land. SARS is allowing independent contractors to apply for a single annual tax directive. Home Affairs is issuing a single work permit for all foreign crew on a particular project.

Broadcast Television

The growth sector is Broadcast Television and South Africa’s leading public broadcaster,South African Broadcasting Corporation South African has 3 national channels and an Africa channel and 2 licenses for regional channels that broadcast in indigenous languages.There are two commercial M-Net channels and over 40 DSTV channels and One free-to-air channel i.e. E.TV.

 

Corporate Video

The making of corporate videos boomed in the 1980’s, when cheap, simple and high quality videocassettes came into the market. Estimates are that corporate video makes up a quarter of turnover in Production in South Africa. The economic multiplier effect of the industry is estimated to be between 2 and 2.5 with spin-offs for the toursim industry e.g. the promotion of destinations where films have been produced. International experience has shown that the industry has a positive economic impact. In Australia, the output multiplier is 2.67.Ancillary servicesthat benefit from the industry include tourism, hospitality, insurance, marketing, tax and legal advisors.

 

Commercials

Locally-produced commercials also feature heavily in the South African market, with Cape Town having the largest share. The commercials sector is very competitive, with over 50 companies thatspecialisein TV commercials.It is an industry driven by the costs related to the purchase of airtime.The sector is characterised by high quality and industry standards.

 

Digital Media

New technologies such as digitization have enabled new content delivery channels such as DVDs and online portals.Digitisationhas lead to an increase in small independent companies that can produce for TV due to reduced cost of production and distribution, once the initial expensive capital cost has been incurred.

 

Promotion of the Local Audio-Visual Industry

Other initiatives being undertaken at government level to promote the local audio-visual industry include: film festivals to showcase films such as the Sithengi International Film Festival, held in November, Cape Town; Encounters Documentary Festival, held in July/August in Johannesburg and Cape Town; Durban International Film Festival and the Loerie Awards, July, held in different venues in South Africa. South African filmmakers are also supported to attend international film festivals such as Cannes, Montréal, and Toronto by Film Commissions/Offices. Other initiatives include the promotion of workshops held by Film Commissions/Offices. The City of Johannesburg has identified film as part of its Creative Industries strategy and has a plan to establish a Film Incubator in Newton. Ekhuruleni has shown interest in promoting locations.

 

Skills Development

Several public and private sector organisations are providing training programmes to help address identified skills gaps including MAPPP- SETA which is responsible for administering skills development in the industry using the Skills Development Levy as well as Coordination oftrainingand mentorshipprogrammes. The Tertiary Institutions offer professional qualifications in fields covering e.g. journalism, production and technical training etc. Several Public – Private Partnership such as the MultiChoice and Department ofLabourFilm Skills DevelopmentProgrammeprovides internships for a 100 trainees. NFVF offers bursaries for study at training institutions. They are responsible for the development of Unit Standards, provide financial support for training projects and are investigating the possibility of establishing a National Film School. Other Private Initiatives such as the Audiovisual Entrepreneurs of Africa, which is a developmentprogrammefor producers in Southern Africa. The commercial broadcaster, M-Net’s New Directions Scriptwriter and Director DevelopmentProgrammeis aimed at growing talent working in the television industry

 

Growth Opportunities

The potential for growth for South Africa’s audio visual industries is immense. Theglobal trends; changes in government policy and South Africa’s competitive advantage in film are all helping to open up opportunities for development and growth. The slow but steady increase in the number of cinema complexes, film festivals and DVD/video rental shops can be used as a platform to increase demand for local production.

 

The growth of satellite and digital technology allows local independent filmmakers to target smaller niche markets.The South African Broadcasting Authority (SABC) has invested in two new African language television stations and is planning on re-launching their SABC Africa channel on DSTV. Both these moves will offer substantial opportunities for aspirant filmmakers, especially those from disadvantaged backgrounds. The decrease in the cost of start-up equipment has lowered entry barriers in the film sector, increasing the number and the variety of new films on the market.

 

The growing governmental awareness of the importance of film has resulted in an increasing number of co-production treaties, incentive schemes and memorandums of understanding with other countries which can boost the service industry and skills transfer.

 

Parminder Vir OBE

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