The South African film and entertainment industry has the potential to generate R120 billion for the economy – equivalent to 1% of what Hollywood generates – compared with the R20 billion it currently generates.
Filmmakers Simon Swart and Wayne Fitzjohn say it can be done, but critical changes are required. This includes direct flights between Cape Town and New York, increased capacity to build film and sound sets, and a simple, reliable and efficient government rebate regime.
The Department of Trade, Industry and Competition (dtic) currently offers a cash rebate for foreign as well as South African film and television production and post-production, and offers SA emerging black filmmaker incentives.
Simon Swart, Los Angeles-based CEO of Nthibah Pictures, says the dtic rebate is critical for the film industry in SA. Should government renege on payments or continue changing the rules of the game, the county could lose its share of the market “in a heartbeat”.
A major hurdle for the South African film industry is global distribution. Many films are too focused on a particular sub-segment of the South African population.
“The US is still about 90% of the consumer market and if a film does not have US appeal it is very difficult to distribute it globally,” said Swart during a recent visit to SA.
It may be possible to penetrate a few small markets who will buy the film, but it is time consuming and costly to find the right market.
Swart recently teamed up with Talent10, an investment holding company in South Africa. He is now CEO of its independent film company Nthibah Pictures, and Los Angeles-based US subsidiary NTB Pictures, after having been part of 20th Century Studios for decades.
Different business model
The company’s business model is to co-partner with large international filmmakers to shoot in SA and to ensure that more of the revenue generated remains in SA.
Wayne Fitzjohn, chair of Nthibah Pictures and CEO of Talent10, says local buyers of content cannot afford to pay for the full cost of a film.
“Generally they will buy the African rights and pay 60% of the production cost. The filmmaker has to recover the rest of the money from selling the international rights. The creatives this side have little means of getting their films distributed globally.”
Swart has decades of experience in distribution.
Fitzjohn adds that with the technological advances and the advent of the likes of Netflix the entertainment market has globalised.
He wants to discourage South African creatives from thinking only of what will work in the local market.
“There are amazing movies coming out of Russia and South Korea, even if [they are] in a foreign language with subtitles. South African movies are just as good and the dtic incentives [have] been working well to draw investments. The question is how to make it work better.”
Swart describes their relationship with the dtic as “collaborative”. However, investors are becoming resistant to coming to SA when they are still waiting for a rebate from previous productions.
“Government has to communicate changes far in advance. You have to manage the expectations of foreign investors.”
Swart is nonetheless optimistic that they can work with the dtic to make the current incentive programme more impactful and thus more likely to attract foreign investors.
He notes that Louisiana offers rebates of 30%, Eastern Europe 40% and New Zealand 25% with no cap on the costs.
Fitzjohn says South Africa does not have to increase its rebates, which are almost on par with those in New Zealand. However, it needs to stop changing the rules in the middle of the game. The criteria must reflect global best practice. “We can’t create our own indigenous rules that make it complicated.”
Swart adds that the turnaround time of rebate payments has to improve. International investors currently underwrite the rebate by providing a loan that is equivalent to the rebate. However, it is less than ideal when the turnaround time post approval is two years.
Independent filmmaking (non-studio filmmakers) is going to explode and filmmakers will always be looking for places where they can generate content.
The knock-on effect in terms of foreign investments, tourism and high-paying jobs is massive, says Swart.
Five years ago the US media and entertainment industry was bigger than its mining, oil and gas and property industries. It supported more than two million jobs and paid wages of $140 billion. The industry comprised 93 000 businesses .
Prior to blockbuster movie Lord of the Rings and the subsequent The Hobbit series, the film industry in New Zealand was non-existent. It has now given rise to 2 800 small businesses and contributes NZ$3 billion to the country’s GDP, says Fitzjohn.