SA’s film industry’s R822m crisis deepens, as incentive row leads to lost productions

South Africa’s film industry has warned that uncertainty and delays surrounding the government’s film incentive have already cost the country R822 million in production expenditure and 1,850 jobs.

The warning was made before the Portfolio Committee on Trade, Industry and Competition as industry representatives and the Department of Trade, Industry and Competition (DTIC) gave Members of Parliament (MPs) contrasting views on the crisis.

Industry representatives said four productions that could have been made in South Africa had been lost, with approximately R75 million in incentives required to secure the projects.

The productions would have generated an estimated R100 million to R125 million in tax revenue, according to the industry presentation.

“The incentive pays for itself,” the industry argued.

Film incentives are not a grant

Industry representatives also challenged the description of the incentive as a grant, saying producers first raise the financing, carry the risk, employ South Africans and spend money with local suppliers before the government reimburses qualifying expenditure once it has been audited and verified.

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Acting DTIC Deputy Director-General Justice Ngwenya told the committee that the incentive had supported international co-productions, emerging filmmakers and local productions for more than two decades.

Between 2016/17 and 2025/26, the department said more than R4.4 billion had been distributed to more than 200 companies, supporting approximately R19.7 billion in qualifying production expenditure.

Ngwenya said the department was also dealing with significant budgetary pressure while trying to ensure the incentive remained sustainable and competitive internationally.

The department presented figures showing that contingent liability had fallen from about R2 billion two to three years ago to approximately R460 million, with projections of R306 million and R148 million over the next three financial years.

The department argued that this showed the liability was manageable without shutting down the incentive.

However, it faces the risk of underspending approximately R236 million available in the current financial year.

Government’s new plan for film incentives

With adjudication committees expected to resume from October, and Form Bs currently taking between 10 and 18 months to process, some of the money could only become payable in the next financial year.

The department said it wants to reduce processing times to between three and six months.

Under the agreed action plan, adjudication committees are expected to reconvene by September 30 to process approximately R703 million in Form B claims.

Short-term administrative workgroups are expected to streamline the process, while work on revised guidelines and transitional arrangements is under way.

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The revised guidelines are expected to be completed by October 30, with the department due to report on progress to the committee in November.

The future funding model remains another major point of disagreement.

At a March 26 stakeholder meeting, the Industrial Development Corporation (IDC) presented a cost-benefit analysis proposing a two-tier hybrid incentive framework.

The first tier proposed a tax-credit mechanism for international productions with qualifying expenditure above R30 million, while the second proposed soft loans.

The proposed tax-credit rate ranged between 40% and 80%, while the soft-loan proposal offered zero interest for 24 months, followed by 6% interest.

The IDC said the model could improve fiscal sustainability, attract global film spending, create jobs and skills, boost local suppliers and tourism, and encourage investment in studios and post-production facilities.

The department said the proposed model was also intended to reduce government’s fiscal exposure and allow public capital to be recycled.

Film industry rejects proposed funding model

But industry representatives strongly rejected the blended-finance and soft-loan model during meetings on June 10 and June 18, arguing that producers need certainty and continuity within the existing incentive framework.

The DTIC said it was working with National Treasury and other stakeholders to explore reforms that would strengthen the programme’s long-term sustainability while keeping South Africa competitive with international markets.

Industry has also called for a different approach to auditing.

It proposed submitting 100% audit-completed claims from independent external auditors to help speed up payments.

The department, however, maintained that it still had a responsibility to conduct due diligence and ensure that public money was only paid against qualifying and verified expenditure.

The dispute reflects the wider tension between the industry’s demand for faster processing and government’s responsibility to protect public funds.

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The crisis has also raised concerns about the Black Filmmakers Incentive, which was created to address historical exclusion, strengthen Black ownership and develop Black talent.

Despite offering the highest rebate percentage, industry representatives said it remains the least-used component of the programme.

They argued that emerging Black filmmakers are particularly vulnerable because they often lack the capital, lawyers, accountants and administrative capacity needed to navigate the requirements.

Applicants must establish special-purpose companies, secure financing, meet ownership and personnel requirements, arrange distribution and provide extensive financial and corporate documentation.

“An incentive intended to open the door has placed a bureaucratic obstacle course in front of it,” the industry submission stated.

It warned that a transformation instrument that its intended beneficiaries cannot access risks reproducing the exclusion it was created to address.

The department said a strategic facilitator would help resolve an impasse between the industry coalition and the film incentive director and oversee the development of revised guidelines.

Workstream groups will include representatives from the department, IDC, the Department of Sport, Art and Culture, the National Film and Video Foundation, the National Empowerment Fund and industry associations.

The groups are intended to ensure an inclusive, transparent and consultative process.

The facilitator will develop an implementation plan with clear milestones and timelines, while regular progress reports will be submitted to the Portfolio Committee on Trade, Industry and Competition.

The department also said it had explored alternative funding mechanisms with industry and National Treasury.

Discussions with the National Lotteries Commission and other stakeholders are continuing.

Ngwenya said the contentious 2021 incentive repudiations had been resolved through internal appeals, with approved payments subsequently made to compliant companies.

The department also told MPs that no reports of wrongdoing by officials had been received from industry through the relevant channels.

Oscar-winning South African filmmaker Gavin Hood also addressed the committee remotely, highlighting the importance of a functioning incentive to the local industry.

His intervention underscored the broader consequences of productions leaving South Africa, including lost jobs, supplier opportunities, skills development, investment and tax revenue.

The department now has a timetable against which it can be measured.

For the industry, the four productions already lost are proof of the cost of uncertainty. For government, the falling contingent liability demonstrates that the incentive can remain financially sustainable if it is properly managed. The challenge now is to find a system that does both, protects public finances while ensuring South Africa remains competitive.

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Mbalenhle Zuma