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Micro Economic Development Strategy MEDS

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Micro Economic Development Strategy MEDS

    Micro Economic Development Strategy (MEDS)

    Western Cape Department of Economic Development and Tourism:

    Film Sector

    Paper One

    Prepared by: Krista Tuomi

    April 2005

    List of Tables………………………………………………………………………… 2 CONTENTS List of Abbreviations………………………………………………………………… 3 Executive Summary……………………………………………………………………6

    Introduction…………………………………………………………………………….13 Global Trends………………………………………………………………………….19 Definition of Film Industry…………………………………………………………… 26 Industry Snapshot …………………………………………………………………… 29 Industry Structure …………………..…………………………………………………40 Advantages of the Local Film Industry………………………………………………53 Problems……………………………………………………………………………… 55 Opportunities………………………………………………………………………… 62 Conclusion…………………………………………………………………………… 65

    Reference Section……………………………………………………………………. 69 Appendix A: Incentives offered by other Countries………………………………..75 Appendix B: The Industry Value Chain in South Africa……………………………77 Appendix C: Training Institutions and their Programs …………………………….78 Appendix D: Average Price Increases in Support and Supply Industries……… 83

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LIST OF TABLES

    Table 1 Productions Facilitated/ Produced in the Western Cape………………….. 29 Table 2 Productions Facilitated/ Produced by the Gauteng Film Office………….. 30

    Table 3 Comparative Overview………………………………………………………… 31

    Table 4 Value of the Film and Television Industry…………………………………… 33

    Table 5 Average Income per Production Company…………………………………. 34

    Table 6 Average Production Budget ………………………………………………….. 34

    Table 7 Country of Origin (For Foreign Projects)…………………………………….. 35

    Table 8 Daily Spend per Production Category ……………………………………… 35

    Table 9 Employment in Production…………………………………………………….. 38

    Table 10 SWOT Analysis……………………………………………………………….. 67

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LIST OF ABBREVIATIONS

ACA - Association of South African Film Crew Agents

    AVEA Audio Visual Entrepreneurs of Africa

    AVMB SGB Audiovisual Media Production Standards Generating Body BCEA Basic Conditions of Employment Act

    BEE Black Economic Empowerment

    CIGS Cultural Industry Growth Strategy

    CFC Cape Film Commission

    CNC Centre National De La Cinematographie

    COIDA - Compensation for Occupational Injuries and Diseases Act

    CPA Commercial Producers Association

    CSIR Council for Scientific and Industrial Research

    CTFPO City of Cape Town Film Permit Office

    CTV Community Television

    CVET - Community Video Education Trust

    DEDT - Department of Economic Development and Tourism

    DOL Department of Labour

    DTI Department of Trade and Industry

    DV Digital Video

    DACST Department of Arts, Culture, Science and Technology DIIF Durban International Film Festival

    DSTV Digital Satellite Television

    DTI Department of Trade and Industry

    DVD Digital Video Disk

    EEA Employment Equity Act

    FRU Film Resource Unit

    FULO Film Unit Liaison Office

    GDP Gross Domestic Product

    GRP Gross Regional Product

    GFO Gauteng Film Office

    HSRC Human Science Research Council

    IDC Industrial Development Corporation

    IMAX Image Maximum

    INDV - Independent Feature Film Movement

    IPO - Independent Producers Organization

    JSE Johannesburg Stock Exchange

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KZN KwaZulu Natal

    LRA Labour Relations Act

    MAPP-SETA - Media, Advertising, Printing, Publishing and Packaging Sector

    Education and Training Authority

    MEDS - Micro Economic Development Strategy NAMA - National Association of Modeling Agencies NEMISA National Electronic Media Institute of South Africa NFVF National Film and Video Foundation NQF National Qualifications Framework

    NTVA National Television and Video Association of South Africa OWN Open Window Network

    PAWE Performing Artists Workers Equity PAYE - Pay As You Earn

    PVA Personal Video Recorder

    RAU Rand Afrikaanse Universiteit

    RPL Recognition of Prior Learning

    SAA South African Airways

    SAASP - South African Association of Stills Producers SABC South African Broadcasting Authority SABS South African Bureau of Standards SAGE South African Guild of Editors SACOD - Southern Africa Communications for Development SADC South African Development Community SAQA South African Qualifications Authority SARS - South African Revenue Service

    SASC South African Society of Cinematographers SASWA- South African Scriptwriters Association SCRAWL- South African Screenwriter Laboratory SDA Skills Development Act

    SDL Skills Development Levy

    SIS Sectoral Information Systems

    SWOT Strengths, Weaknesses, Opportunities and Threats UCT University of Cape Town

    UIF Unemployment Insurance Fund

    UIP United Independent Pictures

    US United States

    VRS Video Resource Centers

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WIFT Women in Film and Television

WITS University of the Witwatersrand

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EXECUTIVE SUMMARY

The Micro Economic Development Strategy (MEDS) is an initiative of the Western

    Cape Department of Economic Development and Tourism. The aim of MEDS is to

    “provide strategic leadership, facilitative support and integrated coordination of

    interventions to provide an enabling, competitive framework for equitable economic

    growth and development.” This report represents the findings of this process for the

    Western Cape Film Industry.

The report was commissioned by the Western Cape Department of Economic

    Development and Tourism. The report does not necessarily reflect the views of the

    Department but will be used to inform future policy formulation.

The Importance of the Industry

The „film‟ industry, from pre-production to distribution, plays a vital role in the

    economies of South Africa and the Western Cape. It stimulates growth, generates

    substantial employment, brings in valuable foreign exchange and acts as an

    important means through which technology is transferred and the South African skill

    base is upgraded. It is also one of the best forms of promotion for the country.

Film has further social and political implications through the role it plays in

    communicating ideas, providing information and engendering debate. The industry‟s

    influence is far-reaching. It directly affects companies involved in production, post

    production, casting, crewing, equipment-hire, set design and property supply. It

    generates many more jobs indirectly in the support and hospitality industries,

    stimulating business in hotels, catering companies, restaurants and transport

    providers.

South Africa and in particular the Western Cape, has a world-class skills base in the

    area of film production, an unsurpassed variety of locations and until recently,

    competitive rates. The local industry has the required competency to become a

    significant player in the international market.

Global Trends

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    The international film and television industry has seen substantial changes in the last few years. A number of these trends have important implications for local industry,

    the most important being:

    ? Film has been characterised by increased levels of horizontal and vertical

    integration, resulting in concentration of ownership and raised entry barriers for new players.

    ? The spread of digital and satellite technology has resulted in increased audience fragmentation.

    ? A secondary pricing system is evident in some developed countries, especially the United States. Under this system, producers recoup most of their costs distributing to their large domestic market and are able to sell their films and programs at a discounted price to other countries. This means that locally produced products in countries with small domestic markets are at a constant cost-disadvantage when competing with foreign offerings.

    ? New technologies, which give television viewers more control over their viewing, are changing the structure of free to air television and threatening the viability of the television advertising production industry.

    ? It is a natural progression for producers and audiences of „run-away productions‟

    (films filmed outside their country of origin) to start viewing a once-favoured destination as „stale‟ and move elsewhere. South Africa, and the Western Cape in

    particular, are starting to feel the effects of this trend.

    ? Most governments compete aggressively through the provision of financial

    incentives and tax breaks. This has led to the situation where countries are forced to offer incentives in order to compete on par with subsidised competition. ? There is an organizational shift away from hierarchical production to a looser network production structure, where studios act as financing and distribution hubs, mobilizing resources from outside. Although this often means greater flexibility and lower overheads, it also makes assembling resources more problematic and reduces innovation in film-making itself.

The above trends both threaten and open up opportunities for the local film industry.

    The sector needs to ensure that it remains aware of these global movements and

    develops the flexibility to remain competitive at all times. Innovation needs to be

    constantly encouraged and investment in quality training and skills diversification is

    vital. With streamlined policy and competitive support industries, the adverse

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consequences of these trends can be mitigated.

Industry Snapshot

    The film industry in the Western Cape currently produces a collective annual turnover of R1 billion, which in turn generates approximately R2.5 billion of economic activity. For the 12 months ending June 2004, this entailed over 1 674 still photography shoots, 461 television commercials and 24 feature films and television series. Cape Town currently accommodates 1650 skilled supply companies (including 6 top-class equipment rental companies) and about 150 production companies, 25 of which specialise in still production.

    As a comparison, estimates for the total turnover of the country amount about R2.2 billion. This generates about R5.5 billion of economic activity annually. Tentative growth estimates for the Western Cape industry stand at about 18%, although the current poor season will substantially reduce this figure. Furthermore, revenue generated by 100% local productions has waned in recent years. Revenue generated by co-productions has however, increased at a rate of 63% per annum. Currently the film sector‟s contribution to the national economy is about 2%, including broadcasting. In the Western Cape, the film industry‟s contribution to Gross Regional Product (GRP)

    is much greater. When one includes both broadcasting and the significant multiplier effect, it is estimated that film may contribute to about 4% of GRP.

    The last comprehensive employment survey estimated that at least 24 324 direct job opportunities were created in the film and broadcasting sector during 1997. The industry has been growing steadily since then and the current employment impact of film is probably more in the region of 30 000. Further jobs have been stimulated in the transport, catering and hospitality industries. A large percentage of employment in the film industry falls into the high and medium skilled category. Developing the local film industry therefore translates into developing the local skill base and raising living standards. Through its effect on the support industries however, the industry also contributes to employment growth in the low skills sector. The one caveat to note is that many of the required skills are highly specialized and not easily transferable. It is therefore vital that film industry maintains a steady growth rate.

Industry Participants

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    The film industry has seen substantial changes in the last ten years, but is still 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 organizations and other interested parties.

Problems

    Due to the high-risk nature of the industry, many governments support their film industry in a number of ways. Most of South Africa‟s direct competitors compete

    aggressively through the provision of financial incentives and tax breaks. These incentives, together with the strengthening rand and the continued escalation of prices in the film and support industries, mean that local competitive advantage is being eroded. South Africa has already lost productions to Argentina, Spain, Portugal, Australia and Miami.

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