New rules cut the action for local film production

A group of SA’s top independent TV and film producers says the government’s recent reforms, which reduce tax incentives and rebates for foreign-funded projects, are hurting the local production businesses.

Countries are competing to attract big-budget productions to their shores as this helps boost local economies through tourism, retail and hospitality, while giving jobs to audio and visual professionals.

A key component of drawing such foreign investment has been tax incentives, which the government has had in place since the early 2000s. But since 2019, the department of trade, industry & competition, under minister Ebrahim Patel, has sought to change that structure. The department felt certain studios and companies were benefiting unduly from BEE.

In trying to fix that, incentives have been cut and approvals for those qualifying are more complex. This caused friction between filmmakers and the state.

“When this rebate was put together, its legacy is that it allowed people like myself to have a career, and a prolific one at that,” said Jahmil XT Qubeka, a member of the Independent Producers Organisation (IPO).

“In a period of 23 years, I’ve been able to make six feature films and two series of international standard. But more than that, the most important thing that the rebate has done for me is that it has, as it was originally intended, put me in the room. As an independent filmmaker, it allowed me a seat at the table.”

Qubeka directed Blood Psalms, the big-budget epic fantasy TV series co-produced by MultiChoice’s Showmax and French broadcaster Canal+. It premiered in 2022.

Over the years, SA has been a popular destination with Hollywood blockbusters such as Avengers: Age of Ultron in 2015 and Blood Diamond, starring Leonardo DiCaprio, in 2006, filmed locally.

International production companies invest more than R10bn annually in SA.

“Basically, it [the rebate] built up independent filmmaking in this country. If I go to a conglomerate like MultiChoice, eMedia, or SABC, it was no longer a situation of coming with a begging bowl. But I would be coming, along with my partners, with a formed business deal that says I’ve got between 35% and 50% of my budget in place; can you cover the gap?” he said.

Uncertainty and delays concerning the rebates had left his own production business owing some suppliers, and with higher debt because payouts were yet to be made from the government, Qubeka said.

The revised foreign film tax rebate offers 20% on qualifying expenditure, with an additional 5% for post-production services provided by black-owned companies, capped at R25m, down from R50m.

The department told Business Day that competition for scarce national resources had led to the scaling back of incentives and that the private sector needed to do its part and fill gaps created by the policy decision.

While the fiscus is strained as evidenced by the recent national budget, filmmakers warn that there is more to be lost by the government’s decision. SA faces stiff competition from countries such as Ireland, New Zealand, Greece, the Canary Islands and Mauritius for investment opportunities worth billions of dollars.

In one example, a TV series was to be shot in KwaZulu-Natal with a budget of R90m over three months. However, when issues over the rebate arose, the project was moved to Greece, resulting in the loss of all the jobs and investment.

The IPO said SA has lost 40 to 50 similar opportunities across all provinces since 2019.

“In the film and television industry there are billions of dollars in production work across the US, Europe, India, China and other regions. These productions often seek suitable locations, crew and cost considerations,” said Michael Auret, a member of the IPO.

He said the net cost involved factors such as crew expenses, exchange rates and the benefits of tax credits or rebates, which essentially refund a portion of the expenses incurred during filming.

Auret is credited with having financed and produced 26 films and TV series, of which 16 were international co-productions.

He was an executive producer for the 2019 state capture documentary How to Steal a Country.

“As a result of the unreliability of the rebate and the hostility of the department ... no financiers will finance the rebate other than state institutions, which lose money on the interest,” said the IPO.