Extras wanted – our look at the SA film industry

Investing in the film and tv industry in South Africa is an attractive alternative investment option that has the potential to offer substantial returns for investors. However, it is essential to note that investing in film and tv can also be a high-risk venture with no guarantee of a return on investment. In this report, we’ll provide a comprehensive guide to help retail investors understand the process of investing in film and the different options available to them, along with the risks involved.

Why Invest in Film and Series in South Africa?

Investing in film and series in South Africa presents several benefits to investors. Firstly, the South African film industry has seen substantial growth in recent years, with several successful films and series produced, such as “Tsotsi,” which won the Best Foreign Language Film at the 78th Academy Awards. Additionally, the South African film and series industry has a combined budget of approximately ZAR 5 billion (USD 337 million), according to the National Film and Video Foundation.

Investing in film and series in South Africa provides investors with a unique and creative way to support the arts, while also having the potential to generate financial returns. According to data from the South African Venture Capital and Private Equity Association, film and series investments have a historical return of approximately 10-15%, making it an attractive investment opportunity. Furthermore, film and series have the power to impact society positively, making it a meaningful investment option.

Avenues and considerations when investing in the Film and TV industry

Retail investors in South Africa have several considerations and avenues to invest in the country’s film and series industry, including:

01 | Equity Financing

Retail investors can purchase shares of a film or series production’s equity, which entitles them to a share of the profits generated by the project. For example, the film “Inxeba,” also known as “The Wound,” had a budget of ZAR 6 million (USD 404,000) and generated ZAR 5.6 million (USD 378,000) in revenue in South Africa alone, according to reports.

02 | Debt Financing

Retail investors can also lend money to a production company in exchange for a fixed rate of return and a security interest in the film’s assets. In 2018, a South African crowdfunding platform, Thundafund, successfully raised ZAR 4.5 million (USD 304,000) to finance the production of a locally-produced series, “Tali’s Wedding Diary.”

03 | Crowdfunding

Retail investors can also invest in film production through crowdfunding platforms such as Thundafund or Jumpstarter, which allows investors to contribute small amounts of money towards a film production in exchange for rewards or equity in the project. In 2019, a South African film, “Kandasamys: The Wedding,” was financed in part through crowdfunding, raising ZAR 2 million (USD 135,000).

04 | Tax Incentives

South Africa offers tax incentives to encourage investment in the film and series industry, which can include tax credits or rebates for production costs. For example, the South African Department of Trade and Industry provides a rebate of up to 25% for qualifying South African productions with a budget of over ZAR 2.5 million (USD 168,000).

05 | Film Funds

Retail investors can invest in film funds that pool money from multiple investors to finance several film productions. These funds are managed by professional investment managers and offer a more diversified investment opportunity. The Film and Publications Board of South Africa, for example, offers the South African Emerging Filmmakers Fund, which invests in emerging filmmakers and offers investors a potential return on investment.

How has the industry performed

The South African film industry has been steadily growing in recent years, with a number of successful local films and series produced. The industry has become a significant contributor to the country’s economy, with an estimated contribution of ZAR 5.4 billion per year, according to the National Film and Video Foundation (NFVF).

Between 2014 and 2018, the NFVF reported that the South African film industry produced 178 feature films and 89 documentaries, with a total budget of ZAR 9.9 billion. While most of the funding came from the government, there has been an increase in private investment in the industry.

Private investors have seen success in the South African film industry, with production company The Bomb Shelter producing award-winning films such as “The Wound” and “Knuckle City”. The company has attracted investment from both local and international investors, showcasing the potential for success in the industry.

To further support the growth of the film industry, the South African government offers tax incentives and rebates for investors. These incentives have been successful in attracting foreign investment to the country, with many international film productions choosing to film in South Africa. In fact, several hit films and series have been produced in the country, including “District 9”, “Black Sails”, and “Blood Diamond”.

So how have some of these films and shows performed? Let us have a look.

• “Inxeba” (The Wound) – film was allocated a budget of R6.5 million and made R 6.8 million at the box office
• “Five Fingers for Marseilles” – A film with a reported budget of ZAR 20 million yet only made R2-R3 million
• “Queen Sono”– A Netflix series with over 2.2 million households in its first month
• “Blood & Water” – A Netflix series that had a viewership of over 11 million households in its first month
• Sarafina!” (1992) – Achieved an estimated R14 million against R10 million budget.
• “Tsotsi” (2005) – The international sensation which grossed an estimated R50 million against a budget of R3.5 million
• “District 9” (2009) – the box office hit that made almost R2 billion against a budgeted R30 million
• “Jerusalema” (2008) – A movie with a budget of R12 million that made R33 million

 
Challenges within the industry

Investing in the South African film industry offers significant potential, but it is important to be aware of the challenges facing the industry.

• One of the biggest challenges is the lack of infrastructure, with a shortage of film studios and equipment available.
• Additionally, there is a shortage of skilled workers in the industry, which has resulted in a lack of experienced crew members, impacting the quality of film productions.
• Investors should also be aware of the limited distribution channels for local films, limiting the potential audience and making it difficult for investors to see a return on their investment.

Despite these challenges, the South African film industry has produced several successful local films and series and the government has been actively supporting the industry with tax incentives and rebates, attracting both local and international investment.

Whether you’re interested in equity or debt financing, crowdfunding, or film funds, there are many options available for investing in the film industry in South Africa. However, it’s important to carefully consider the potential risks and rewards of each investment opportunity before making a decision.

Investing in film can be a high-risk, high-reward venture, and it’s important to have a clear understanding of the investment process and the potential returns before committing any funds. Additionally, it’s important to work with experienced professionals who can help guide you through the investment process and ensure that your investments are well-managed and protected.

Despite the challenges facing the South African film industry, the potential rewards for investors can be significant. By investing in the industry, you can help support the growth of a dynamic and important part of the country’s economy, while also potentially generating significant returns on your investment.