To great evils the great means. And that’s exactly what the co-founders of award-winning film and television production house Yellowbone Entertainment felt when they took the Department of Trade, Industry and Competition (DTIC) to court after millions of rand guaranteed by the South African Film Rebate program were unexpectedly withdrawn.
This delayed the post-production of Blood Psalms, a MultiChoice and Canal + co-production, the most expensive and ambitious television series produced in Africa. The court forced DTIC to return to the board table and last week the department agreed the money would be paid, but that leaves everyone, including Yellowbone co-founders Jahmil XT Qubeka and Layla Swart, with a bad taste in her mouth.
“The discount system is everything; you can’t do business without it. If you prepare a business case for financing and can show that you get a rebate that will cover 35% to 50% of your costs, it becomes so much easier to find the rest of the money. That’s all. We depend on it, ”says Qubeka.
Yellowbone isn’t the only local film studio to suffer the consequences of what many in the industry see as inexplicable behavior on the part of DTIC. “At least 30 local productions have received recent letters of repudiation from DTIC, and at least R650 million are in circulation,” said an industry insider who preferred to remain anonymous. “It’s having a catastrophic impact on the industry. Three months ago, movie studios had more work than they could handle, and it was an opportunity to create opportunities for new entrants. But now the projects have been delayed or are moving to other countries which also have incentives and the studios are fighting for every job they can get.
Taking a step back, the incentive program was created in 2004 when the then DTI recognized that foreign film spending could provide a rapid injection of capital into the economy. Slowly word got out that SA was a fantastic destination, and producer Ridley Scott arrived, producing feature films like Raised by Wolves in SA. But as the studios involved in this foreign work grew, those that produced for the local market did not. “We lobbied DTIC for a local program,” says Mayenzeke Baza, head of distribution and financing at AAA Entertainment. “Funding a film in South Africa is almost impossible and although local platforms like DStv and M-Net do commission work, there is an issue with who owns the intellectual property. It is not the local producer. This incentive is vital for the local industry.
It is widely believed that these programs have helped catalyze the growth of South Africa’s industry. An Economic Impact Report from the National Film and Video Foundation noted that in 2019/20, the industry contributed R 7.2 billion to the economy and supported 31,444 jobs. That figure fell in 2020/21 to 2.9 billion rand, with just 12,775 jobs maintained. While Covid-19 is the obvious culprit, the report noted that between 2017 and 2019, the growth of South Africa’s film industry has remained stable and, at worst, has declined since the previous study in 2017. This was mainly due to funding constraints, an unreliable DITC and challenges facing the likes of the SABC, according to the report.
The actions of the DTIC are even more disconcerting, given that the foreign reimbursement incentive is self-financing because it contributes to the tax authorities. The case can be done by analyzing the audited production expenditure accounts transmitted to the DTIC at the end of a project, as required by the incentive. According to one set of accounts, every R1.00 of the foreign cinema incentive attracted R6.31 in foreign investment in South Africa, earning R1.22 in direct taxes, delivering a 122% return on every R1 incentive before take into account R2. 34 indirect and induced taxes, making this a total of 3.55 R in taxes collected by the Treasury for each 1.00 R incentive.
The timing couldn’t be worse. The past decade has seen an explosive growth in on-demand streamers such as Netflix, Amazon, HBOMax, and Disney +, which has led to a race to create new and original content to attract subscribers.
“This has created an unprecedented opportunity for South Africa to participate in the insatiable demand for content around the world,” said Trish Downing, Executive Director of the Independent Producers Organization (IPO). “International production spending has grown from $ 177 billion at the start of 2020 to over $ 220 billion in mid-2021. The depletion of the stock of series and films during the lockdown has led to an even greater increase in demand for new original content with more than R4.5 billion in foreign direct investment in television series and films destined for SA over the next 18 months. “
However, Downing was unwilling to comment further on the possible reasons for DTIC’s behavior, or the possible consequences. “We have had several productive engagements with Minister Patel and his team and we are working to resolve the issues.” She wasn’t the only one hesitant to speak to the DM168. Very few actors, in particular the big studios, would speak on this subject for fear of annoying the DTIC. For its part, the DTIC, the minister, and its director general, did not respond to calls for comments.
At the heart of the matter relates to black economic empowerment and transformation within the industry. At one level, the industry is relatively transformed, with more than half of industry companies at Level 1 (including the two largest black-owned Moonlighting and Film Afrika studios), with another 24% from industry to level 2. But on another level, transformation is slow. For many years, the film industry has been exempt from BEE legislation and has not had to comply with the generic scorecard. This is addressed with the development of the B-BBEE scorecard project of live event services and technical production underway between DTIC and the Ministry of Sports, Arts and Culture.
“Transformation is happening, but at a pace that does not foster inclusive economic growth at all levels of the value chain and does not recognize the potential and aspirations of black-owned businesses,” says Quinton Fredericks, a director. award-winning documentaries. and co-chair of the IPO. “Foreign investment is important and keeping the big studios busy is absolutely critical, but how do you tap into and keep this huge opportunity for investment and growth in a way that supports some of the key issues around the transformation and responds? to both industry and government goals in stimulating inclusive growth and creating much-needed stability? “
Baza adds, “Yes, the industry is being ‘blackened’. But the feeling I have with the big studios is that it’s happening at the top. We do not see any legitimate and real transformation in any meaningful way. “
Some industry insiders DM168 spoke to agreed that perhaps this was a legitimate review and that more work needed to be done. Others rejected it completely. “The problem is the bad administration within the DTIC. It’s even worse than corruption, ”says Qubeka. “And the fact that there is no process to challenge the DTIC decision or hold them accountable makes the situation worse.
“We have been accused of being front line… My business is 100% black owned and my ego is way too big for anyone to do. “
That said, there are companies that can be on the front lines, and if they are, they have to be tackled.
“DTIC rejects the allegations it pre-approved. This process requires tons of documentation. If DTIC approves a company, it needs to do due diligence up front, not after making the funding commitment, ”he says.
As a direct result of DTIC’s actions, SA’s market share in global production spending fell from 2% to less than 0.25%. “DTIC is failing to honor its financial commitments and this threatens to derail the sector completely and endanger jobs and livelihoods,” an insider said.
However, Fredericks is optimistic. “We want a partnership with DTIC, rather than an antagonistic relationship. And we are working together to resolve these issues. If we do, we will make this industry great. ” DM168
This story first appeared in our weekly Daily Maverick 168 which is available for R25 at Pick n Pay, Exclusive Books and airport bookstores. For your nearest dealer, please click here.