Co-productions, treaties can unlock government funds

South Africa may offer versatile locations but the world of production incentives is cutthroat.

“Visiting the Locations Expo in Los Angeles, it dawns on you that there are hundreds of options for producers that all offer incentives, and that the $1.25¬†million we offer is just a drop in the ocean compared to the 30%-40% uncapped rebates available in other territories,” says Film Afrika producer Vlokkie Gordon, speaking about the Dept. of Trade and Industry’s (DTI) soft funding for projects shot in South Africa.

“Marketing South Africa has to be about making our partners aware of all the other extraordinary benefits of shooting here,” Gordon continues. “The rebate is just the cherry on the top, rather than the whole dessert.”

At the start of 2008, the DTI introduced a revised film production incentive, comprising the Location Film and Television Production Incentive Scheme and the South African Film and Television Production and Co-Production Incentive Scheme. Those programs paid out R209 million ($26.1 million) on 44 projects last year, a sign of the local government’s continued support for the growing film sector.

The Location Film and Television Production Incentive Scheme replaced the Large Budget Film and Television Production Rebate, which the DTI implemented in 2004. The new incentive is available to foreign productions with qualifying South African expenditure of R12 million ($1.5 million) and above, down from the original R25 million ($3.1 million). It provides a rebate of 15% of the qualifying spend.

The South African Film and Television Production and Co-Production Incentive Scheme is available to both South African productions and official-treaty co-productions with a total production budget of R2.5 million ($312,500) and above. It provides a rebate of 35% for the first R6 million ($750,000) and 25% for the remainder of the spend.

South Africa has co-production treaties with Canada, Italy, Germany and the United Kingdom, while further treaties with Australia, Ireland and France are in the process of being finalized.

“There are very good financing options through co-prods,” says Gordon, who is a producer on HBO’s “The No.¬†1 Ladies’ Detective Agency.” “Other than an increased rebate from 15% to 35%, you can access other regional funding offered by the co-prod partner.”

Both DTI rebates apply to feature films, TV movies and drama series, documentaries, animation and shortform animation. “Foreign films need to shoot here for 50% of their time and a minimum of four weeks, while co-productions and South African films need to shoot here for a minimum of two weeks,” Gordon says.

The DTI, which has identified the film industry as one of 11 strategic growth areas in South Africa, has been roundly praised by producers for its helpfulness and the rebate’s ease of use.

According to Genevieve Hofmeyr of Moonlighting Films, the South African production partner on Clint Eastwood’s “Invictus,” rebate payments tend to be made within four to six weeks of a film’s completion of filming on a non-co-production.

The major complaint about the rebate is that it’s capped at a maximum of R10 million ($1.25 million) per project.

“We have lost business to other countries because we can’t compete for large movies when the producers have other options,” says Michael Murphey of Kalahari Pictures, which co-produced “District 9″ for Sony.

Despite the limitations, the local biz believes issues can be resolved in time.

“The DTI has proven to be very flexible and accommodating with regard to refining or modifying their guidelines where it improves the overall effectiveness of the rebate program and the attractiveness of shooting in South Africa,” Hofmeyr says.

Apart from the DTI, the other main source of financing is the Industrial Development Corp. (IDC), which caps its investment at 49% of the overall budget but receives more mixed reports than the DTI.

Gordon says, “The high interest rate makes affordable financing difficult. The IDC has been a disappointment; their deals are expensive and unrealistic.”

Hofmeyr adds, “Certain protocols within the IDC are fairly bureaucratic, and this can cause delays in the financial close, so some streamlining would be beneficial.”

However, Hofmeyr is positive: “They place a lot of emphasis on developing the local industry, and they are a critical source of local funding in South Africa. In our experience, they have helped to empower the local producer, which is a big positive. Although up to now it has been very difficult for small-budget films to access IDC funding, recently there have been some encouraging indications that the IDC may modify their investment structure to accommodate these types of films going forward.”

More promisingly, the Independent Producers’ Organization has been making presentations to Parliament around reviving and clarifying the Section 24F tax break, which fell into disuse after being abused in the 1980s.

Local producers also are starting to explore pan-African financing, with talk of funds in Nigeria, Kenya, and the Democratic Republic of Congo, but this is still embryonic and untested.

For now, South African financing remains the cherry on a very large cake. As Murphey concludes, “More important than the rebate, than exchange rates, than co-production treaties is that South Africa is simply a great place to make a movie. Nearly every foreign producer who has made a movie in South Africa comes back again.”

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