SA's film industry is starting to make waves. Suddenly, locally made films are starting to win critical acclaim and notching up awards at international film festivals, while SA is again becoming a popular production destination for overseas films.
Films like Hotel Rwanda, Drum, In My Country, Tsotsi and the Aids epic, Yesterday, are starting to make an impact internationally, albeit limited, and in Cape Town this month the Sithengi film festival is showcasing more than 110 SA feature, short and documentary films.
One crucial element is missing, though - commercial success. The industry is gaining local and international recognition but has yet to capture the imagination of the global market to the extent that the Australian industry has done. With a small local market, international success is crucial for investors to make a return out of films that are "Made in SA". So far it has not been forthcoming and financiers for the movie industry have been hard to come by.
The notable exception is the state-owned Industrial Development Corp (IDC). Since it started investing in the movie industry in 2001, it has committed more than R500m to documentaries, feature films and television series, making it the largest backer of the local motion picture industry.
So far the IDC has spent R330m and more than R170m is still to be disbursed. But this could go higher if there is demand, says Moses Silinda, the head of the IDC's media and motion picture strategic business unit (SBU).
Until the emergence of the IDC the industry was largely reliant on a few independent film companies, like Anant Singh's Videovision and FilmAfrica, to make the odd big-screen movie. Leon Schuster also produced the occasional big hit, but beyond that there has been little development.
All that has changed in recent years and FilmAfrica's David Wicht, who is also a member of the Independent Producers' Association, says a major film is being produced in SA every month. "The industry has grown strongly over the past four to five years," says Wicht.
Much of the credit for this has to go to the IDC, whose presence in the market has encouraged more local and international investors to come forward. Rand Merchant Bank has made tentative steps into the industry and so has JSE-listed African Media Enterprises, through its acquisition of Moonlighting Film Production in 2002. There are hopes that Barclays, a committed funder of movies offshore, could play a similar role in SA now that its acquisition of Absa has been completed.
For the time being though, the IDC is likely to dominate the scene. Its investment has increased steadily and last year 15 projects were funded by about R200m. This figure is likely to rise, as Silinda believes about 50 major films will be made in SA this year, many of them without the involvement of the IDC.
Though this number is still well below some of the global leaders in the industry - the US produces about 500 major commercial movies a year, the UK 100 and India a staggering 1 000 - it is a significant improvement on the 20 or so a year SA made just five years ago.
The economic impact of the IDC's investment should not be underestimated. According to calculations by Wicht, the R500m it has committed has stimulated a further R1,5bn in other investments. Of this, about 75% is invested in SA. Applying an economic multiplier effect of five, which is the norm internationally, it means the IDC's investment has created about R3,5bn in economic value, not to mention jobs.
"These days, if you want to do a movie in SA, you'll knock at the door of the IDC. They are vital to complete the job," says Wicht, who has worked with the IDC on a number of projects, including In My Country.
The IDC's entrance in 2001 came at a crucial time for the industry. The rand was beginning to turn after hitting record lows that year. The weak rand, coupled with SA's low cost base, good weather, diverse landscapes, skilled and experienced film personnel and excellent infrastructure, had resulted in boom times for the industry during the late 1990s. SA was one of the world's favoured film destinations.
As the rand strengthened, the low cost base was undermined. Investors looked to other destinations closer to Hollywood - the centre of the film universe - which also offered substantial national and regional financial incentives.
Explaining the IDC's move into the sector, Silinda says in the late 1990s the organisation had started to diversify from its traditional industrial base to funding service-based industries like tourism, health and education. "It was a natural step to move into media and motion pictures, an industry that at the time was beginning to require greater financial support," he says.
And, of course, this industry meets many of the other socioeconomic and development criteria that are required for the IDC to consider investing in a sector. These include job creation; skills transfer; rural development; and the multiplier effect on other industries such as hotels, catering and security. Furthermore, movies filmed here tend to have a positive tourism spin-off as they promote the country.
The empowerment angle is crucial in supporting the industry. Silinda says the IDC involvement helped market black filmmakers like Zola Maseko (Drum), Anant Singh (Red Dust) and Bheki Petersen (Zulu Love Letter).
The IDC insists that its portion of the funding, which averages 35% and does not exceed 49% of a movie's total cost, is spent in SA, though it accepts that some post-production will be done externally. It also requires that many of the socioeconomic conditions listed above are fulfilled.
Of course, the project must also be financially viable.
The IDC only issues loan funding, as opposed to equity participation, to film ventures. However, the repayment period is fairly open-ended and the interest rate is normally fixed. On average, the rate is prime plus two percentage points, though this varies from project to project. "It is difficult to say when the film will start making solid profits so we have to be fairly flexible in our approach," says Silinda. However, the IDC is normally one of the first creditors to be repaid when the revenue starts to come in. He stresses that it's crucial for the IDC to work with other agencies, often foreign funders or international movie sales agents, in financing film projects. It does not carry a project on its own.
The movie project started badly for the IDC when it sponsored Stander, the movie about the notorious gang of SA bankrobbers of the 1980s. Four years after its release, the film has returned only about a third of the organisation's original R35m investment.
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The film aptly demonstrates the difficulty of making a local movie that has international appeal. "To make a film that is commercially successful you either have to make it low-cost or appeal to a foreign audience by picking a palatable theme or bringing in well-known foreign actors," says Wicht.
He says the domestic market of about 26m movie visits a year - compared with Australia's 120m visits, for example - is not big enough to support a thriving domestic film industry.
The IDC has learnt from its early mistakes and its more recent projects show early signs that they will return a reasonable profit for the group. Recent high-profile investments include:
- Hotel Rwanda, which received numerous international awards, including several nominations at the Academy Awards. The IDC invested R58m in the project. Almost 10 000 extras were used in the making of the film.
- In My Country, previously called Country Of My Skull, a film based on SA's Truth & Reconciliation Commission, featuring Juliette Binoche and Samuel L Jackson, has also won international awards. The IDC's contribution was R35m.
- Red Dust, based on a novel by Gillian Slovo, to be released soon.
- Drum, about the successful black magazine of the 1960s and 1970s, also received widespread critical acclaim.
- SA's offering at this year's Academy Awards, the urban drama Tsotsi, which cost about R30m.
The largest investment by the IDC in a motion picture to date is R60m in the TV series Charlie Jade, which is being aired in a number of countries and was one of the corporation's earlier ventures.
Overall, says Silinda, his SBU is not yet making a profit but he estimates that it takes at least five years before one can accurately gauge the financial success of a film venture. "The movie might not make it big on the screen circuit but it can make substantial revenue from the subsequent video and DVD market." He cites the example of an IDC-backed horror movie, Bone Snatcher, which has been a surprise success on the US DVD circuit and is starting to reap profits.
Silinda hasn't closed the book on Stander yet, waiting for the final audited returns before he declares the investment a bad debt. "People were clearly unhappy about the money we spent on the movie at the time, but you need to remember that it was our first venture and we were still finding our feet. We now have a much better feel for what works and what doesn't," he says.
He's optimistic about the growth of the IDC's portfolio and of the industry in SA as a whole. It's an optimism that is shared by Wicht, who says that many of SA's natural advantages as a destination - good weather, race diversity, solid infrastructure and skills and diverse locations - have recently been complemented by the department of trade & industry's (DTI) incentive scheme.
The incentives provide cash rebates of up to R10m if more than R25m is spent on a production. Foreign films can get a rebate of 15% of their costs up to a maximum of R10m.
Silinda says that the IDC has been working with the DTI on these incentives and they have proved an attraction for larger production houses, both local and overseas, though smaller SA filmmakers argue that they hardly ever spend R25m on a movie.
Government has traditionally been wary of offering incentives after the much-abused movie schemes of the 1980s. Even the National Film & Video Foundation, which seeks to assist independent producers, has had its budget slashed this year and has already exhausted its R35m funding. "Given its cautious approach, the impact of the DTI rebate has been tremendous in attracting filmmakers," Wicht says.
But he also warns that over the past two years, other countries have made a concerted pitch to attract the film dollar and this has made SA's position a bit more precarious, particularly as the rand has not weakened.
Adds Silinda: "There is certainly a lot more competition from Eastern Europe, South America, Australia and Canada and our costs aren't that low anymore."
Wicht says the perception of crime is still a deterrent for foreign investors, as is the simple fact that SA is far away from the US, where most big production houses are based.
Australia is often held up as an example of how to build a movie industry through the use of incentives, government assistance and training programmes.
But Wicht believes that Canada offers a better example of how to promote local production. "Through their range of incentives and development packages the industry attracted US$2bn in production and created 50 000 direct and 80 000 indirect jobs.
"A crucial part of their incentive structure is labour rebates and extensive support by the government of the province in which the movie is made."
Though SA labour costs are about 20% below Canada's, Wicht says SA lacks the incentive schemes that attract investors to a country.
In recent submissions to parliament he proposed amendments to tax allowances for film investments, as covered in section 24F of the Income Tax Act. "Only if investors are granted allowances for the full risk they take in backing productions will we have an increase in funding for the SA film industry," Wicht says.
Silinda says even though the SA film industry might thrive in the long term without state assistance, "in the short term it certainly needs a helping hand".
