South Africa film sector has grown 14% per annum over the last five years

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The National Film and Video Foundation (NFVF) recently commissioned Deloitte to do the first ever national study on the South African film industry and its economic impact on the economy. The report titled, South African Film Industry Economic Baseline Study revealed that in 2012 the industry contributed R3.5 billion to the national economy. By Karen van Schalkwyk

The industry also made payments to the South African Revenue Service (SARS) of more than R670 million, which is R420 million more than the estimated R250 million Film and Television Incentive paid by the Department of Trade and Industry in 2012. In 2012 a total of 25 000 full time jobs were created.

Zama Mkosi CEO of the NFVF says that the report on the industry was long overdue. “Statistics on the key economic indicators of the industry such as its size, value and numbers of job created were outdated. The research was necessary to ensure that we have an understanding of the key economic indicators as well as the trends that came out of the qualitative research. The results show that the industry is viable and deserves more investment and support. The NFVF will use the findings to inform strategies and position the industry in its rightful place.”

When compiling the report a multiplier of 2.89 was used, this means that for every R1 spent in the film industry, an additional R2.89 is generated in the industry and ancillary industries. This places the South African film industry mid-range when compared to the economic contributors of 99 other industries in the country.

For instance the top five industries in South Africa, (financial services, public administration, electricity distribution, insurance and pension funds) have a GDP multiplier of between 3.71 and 3.52 whilst the bottom five industries multiplier effect are between a high of 1.42 and a low of 0.99. The multiplier was calculated from the information collected. The value chain, costs and industries were fed into an economic model and this generated the multiplier of 2.89. This was then applied to the direct costs within the value chain which ultimately gave the total size of the South African film industry.

Judy Prins, Leader of Deloitte Sport, Media & Entertainment explains that the report can contribute to the creation of investor confidence in the local film industry within the private and public sector. “The government benefits from the 2.89 multiplier which means for every R1 that they invest in the industry, the industry generates an additional R2.89. From the government’s point of view, the industry is worth supporting. However, points out Prins, the private sector does not necessarily use the multiplier as an indicator of the return on its investment and hence it is more reticent about investing in the film industry.

Prins says that private investors base their return on investment (ROI) on the amounts received back from the film via the various revenue streams. “Currently, due to the fact that the distribution mechanisms are not generating sufficient funds back on the films, the ROI to private investors is fairly poor.”

The report indicated that the film sector has grown 14% per annum over the last five years and that with further support from government and the private sector the film industry can contribute significantly to the national economy and job creation.