Incentives and low production costs draw international filmmakers to South Africa

An increasing appetite for domestic content and a rising appreciation by foreign filmmakers of South Africa as a filming location should sustain growth in the country’s entertainment industry, with the sector’s expansion set to outpace that of the broader economy in the years ahead.

South Africa’s film entertainment market is projected to grow by 6.4% in 2015, generating earnings of R2.76bn ($240m), according to a PwC study. Revenues are expected to reach R3.42bn ($295.5m) within three years, with the industry expanding by a compound average growth rate of 7.1% up to 2018.

Broadening the Market

A system of incentives put in place by the Department of Trade and Industry (DTI) is helping to support the South African film industry, providing assistance to both domestic and foreign productions. The incentives not only encourage filming on location in the country but also offer additional rebates for post-production work conducted therein. This is helping to create employment in the sector, which currently numbers around 25,000 jobs according to DTI figures, and further develop the skills base of the local industry.

The financial incentives include a 20% income tax deduction on production for foreign movies filmed in South Africa with budgets of R12m ($1.04m) or higher, with a cap of R50m ($4.32m). There is also an additional 2.5-5% deduction offered to those conducting post-production work on the ground, depending on the level of expenditure. Another promotion scheme includes a 35% rebate on the first R6m ($518,000) of qualified spending, with a 25% rebate applied on all spending thereafter, according to the DTI.

Box Office Figures

In addition to fostering South African content and expertise, these incentives are creating an important multiplier effect on the broader economy. The DTI estimates that for every R1 ($0.09) spent on film production, another R3 ($0.26) is spent in the wider economy, effectively tripling income from the department’s over R60m ($5.18m) worth of investments to date. Lower production costs are another draw for overseas filmmakers. According to a recent study by the Gauteng Film Commission, it is 40% cheaper to shoot a movie in South Africa’s Gauteng Province than in Europe or the US, and up to 20% less expensive than filming in Australia.

The weaker rand, down 7% against the US dollar in the first 3 quarters of 2015, will make local film shoots even more cost effective for foreign productions budgeted in their own currencies. While the cost of travel remains a factor in budget considerations, especially for crews coming from the US or Europe, added positives such as the country’s broad skills base, established infrastructure and widespread use of English, weigh heavily in South Africa’s favour.

The support of the DTI, combined with South Africa’s other competitive advantages, is likely to drive an increase in foreign productions filmed in the country, according to Charl van der Merwe, CEO of film and broadcast service provider Silverline360. “It’s an exciting time to be in the film and television industry, especially if you’re catering to the international production companies,” he told OBG. “Going forward, we’re going to need to grow our production capacity to keep pace with increasing demand, while also focusing on strengthening our offering across the entire value chain.” Growth in the local industry is also expected to boost domestic content generation, which is expected to help the sector expand.

However, to fully develop the South African creative industry, original content needs to be produced that can appeal to a larger market, according to Christine Service, country manager for the Walt Disney Company Africa. “The industry is recognising that to be successful and to fund the development of content with high production values, the creative community needs to make content that has the potential to reach beyond one single country or market,” she told OBG.