Why Now is the Time to Shoot in South Africa

After months of negotiations and debate, South Africa's Department of Trade and Industry and Film Afrika has unveiled an ambitious revamp to its incentive strategy.

In an official announcement made at this month's American Film Market, the DTI detailed a two rebate structure: The first category refunds between 25% and 30% of qualifying Rand spent on international treaty co-productions and South African films; the second rebate refunds 15% of Rand spend on entirely foreign-serviced films. The two incentives from the DTI are distinct and cannot be used concurrently, and the maximum payout on both rebates has been doubled, from 10 million-20 million Rand ($1.5 million-$3 million).

To qualify for either rebate, a minimum 50% of a film or television production's principal photography must take place in South Africa, and the production budget must be a minimum of 2.5 million Rand ($360,000) for a co-production and 12 million Rand ($1.7 million) for offshore shoots. The rebate's application to television productions brings South Africa's rebate in line with Canadian policies.

"We are delighted that the cap has just been doubled as this helps keep our rebate competitive internationally," Film Afrika managing director David Wicht says. "With this increased incentive, South Africa remains unbeatable in terms of cost, production value and skills, especially for films budgeted $15 million or less."

The increases didn't come easily. According to DTI reports, the increase came only after extended consultation with regional film industry players, the South African Industrial Development Corp., the National Film and Video Foundation, the National Treasury and the Department of Arts and Culture. The resulting consensus indicated that the higher cap will be welcomed by all stake holders.

By way of comparison, Australia and New Zealand offer incentives of 40% uncapped. The DTI report proposes that major productions headed to those countries could be lured to South Africa post-increase.

Before the DTI and Film Afrika announcement, Kenya introduced a rebate incentive of 35%, with a cap of $2 million. Puerto Rico also entered the runaway production competition with an uncapped rebate incentive of 40%. DTI's reporters claim South Africa is competing on a number of films that are considering both countries.

The increased cap coincides with the Rand's recent climb against the dollar in a continued economic resurgence following last summer's FIFA World Cup. Earlier this month, the Rand and South African stock interests scaled to a near three-year high against the dollar (about 6.83 Rand to $1) as investors gravitated toward new international opportunities amid the continued U.S. recession. Additionally, DTI records show the Rand strengthened against all major world currencies in the first quarter.

"The Rand has continued to strengthen significantly in recent months, making South African production costs up to 30% higher in dollar terms than a year ago," DTI spokesperson Mandi Van Rensburg says. "The DTI cap increase is self-sustaining. The film incentive attracts a positive cash flow to the South African [economy]."

The DTI's Film Adjudication Committee accepted the cap proposal in May and recommended that the higher cap be implemented when the Minister of Trade and Industry signs the submission in the coming weeks. Film Afrika and the DTI were allowed to make the official announcement.

The DTI also recently introduced a system in which the rebate can be drawn down during production based on reaching certain production milestones. These adjustable plateaus alleviate the need for productions to raise loans or other funding to continue qualifying for the rebate.

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In addition to combating the fluctuations in the exchange rate, Van Rensburg says the primary motivation for the cap increase was a desire to remain competitive in the face of significant changes in international production brought on by a troubled global economy.

"The recent global economic downturn has meant a dramatic reduction in funds available for film production internationally," Van Rensburg says. "The films that are being made have budgets that are significantly lower. This has lead to every major filmmaking region introducing highly competitive incentives to attract the remaining film dollars."

Indeed, the lingering impact of the economic crisis was threatening to put the success of South Africa's popular rebate program in jeopardy, and the potential for significant job losses and a reduction in support services could have been catastrophic to the industry.

And given the role offshore shoots play in the overall economy, Van Rensburg says fewer film shoots would have a ripple effect throughout the country, and affect hotel bookings, car and truck rentals and other goods and services. "The objective of the increase was to place South Africa on an equal footing with the bottom tier of rebates on offer elsewhere," she says.

Wicht stressed that the pre-increase DTI rebate was critical to the growth of the regional film industry in recent years. He says the increase should only add to the country's attractiveness as a co-production partner.

"As a co-production partner, [Film Afrika] has been making use of the rebate for a number of years now, and it is without doubt one of the best-managed and simplest-to-use rebates we have come across internationally," he says.

But even with the new rebate, the question going forward is whether the increased cap will help bring larger budget films to South Africa amidst a less-than-ideal economic climate.

"The economic condition had an impact worldwide, not just in South Africa," Wicht says. "Even at current rates, films made in South Africa still look like budgets three times the size compared to what is on offer elsewhere -- films shot here simply look richer, dense and feel huge."

In addition to the rebates, South Africa is also poised to benefit from the recent opening of Cape Town Studios at full capacity and the announcement that the U.K.'s DNA Films will be producing its 3D relaunch of the "Judge Dredd" franchise at the facility.

"[The studio facility] strengthens our ability to produce films shot with big production values on a sound stage," Wicht adds.

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