South African AV Industry Overview

1. South African AV Industry Overview • Institutional Landscape • Key Trends • Industry Growth Drivers

2. South African AV Industry Overview • Institutional Landscape • Key Trends • Industry Growth Drivers

3. The South African audio-visual industry dates back to the ‘birth’ of film, circa 1895 South Africa AV Industry Brief Timeline: Late-1980s 1895 1956 1962 Mid-1980s State support For Afrikaans films Films shown in Witwatersrand Afrikaans based private capital financing Afrikaans films Creation of ‘black’ films by predominantly white producers Tax concessions boost production of US imitated films Collapse of tax shelter scheme New democratic dispensation. Cultural industries established as a priority sector by government Some films produced that depicted urban black culture Segregation of cinemas 1950s 1950s 1970s Post-1994 Since 1994, the local feature film industry has experienced a rebirth and foreign productions have increased; however skills development and other challenges remain. 3 Source: Deloitte SA Market Research

4. The South African audio-visual industry has two segments - the servicing of foreign productions and production of local content South Africa AV Industry Snapshot: • The South African audio-visual industry encompasses a range of creative production activities including film, TV and documentary production, commercials, stills photography and multimedia. • The two main streams of the South African industry are: • The facilitation and provision of logistical and technical services for foreign productions, • The local production of South African commercials, TV, documentaries and feature films. • South Africa’s film and TV is industry is located around the two major cities of Johannesburg in Gauteng Province and Cape Town in the Western Cape. There is limited activity in other provinces. 4 Source: Deloitte SA Market Research

5. South Africa has established audio-visual hubs in Gauteng, the Western Cape and Kwazulu Natal Audio-visual Hubs: There are similar or equivalent bodies to the GFC in South Africa, the major bodies being: • Cape Film Commission • Durban Film Office NB: For the purposes of this project, an audio-visual hub is defined as the centre or focal point for film related matters within a Film Commission. Film Commissions and Offices can play an important role in driving growth through industry promotions and marketing. 5 Source: Deloitte SA Market Research

6. The Cape Film Commission is mandated to promote Cape Town and the Western Cape region to the entertainment industry, as a world class production destination Cape Film Commission: Establishment • The Cape Film Commission was launched in 2001 by the City of Cape Town and the Provincial Government of the Western Cape. • Position Cape Town as a globally competitive film city, thereby boosting tourism, job creation and the development of core skills, • Increase the Cape's global film making share. Strategic Objectives Keys Activities • Facilitate and coordinate on-location filming in both the City and the Province, • Assemble and manage all information that affects and influences film making in the region - visas, immigration and crew rates, permits and permit management etc, • Communicate regularly with neighbourhood and business organisations so as to mitigate any negative impacts associated with filming, • Promote the absorption of large numbers of professionals from disadvantaged backgrounds into the film industry, • Increase access to the industry for all “Capetonians”, • Provide information on funding opportunities for training and film projects. 6 Source: Deloitte SA Market Research

7. Similarly, the Durban Film Office has a mandate to promote KZN as a world class production destination and attain 3% of the global film making share by 2008 Durban Film Office Overview: Establishment • The Durban Film Office was launched in 2003 by Ethekwini Municipality. Strategic Objectives • Position Durban as a globally competitive film city, thereby boosting tourism, job creation and the development of core skills and SMME’s, • Increase Durban’s global film making share from 0% currently to about 3% by 2008. Keys Activities • Facilitate and coordinate on-location filming in both the city and province. • Assemble and manage all information that affects and influences film, making in the region – visas, immigration, crew rates, permits and permit management etc, • Communicate regularly with neighbourhood and business organizations so as to mitigate any negative impacts associated with filming, • Promote the absorption of large numbers of professionals from disadvantaged backgrounds into the film industry, • Provide information on funding opportunities for training and film projects. 7 Source: Deloitte SA Market Research

8. There are also several other emerging hubs in South Africa, evidence of the growth potential of the local audio-visual industry Emerging Hubs: • The Mpumalanga Province is in the process of setting up a Film Office / Commission through its Arts and Culture department. A detailed research and strategic plan has been developed, with implementation to commence once funding has been secured. Mpumalanga • The Eastern Cape province has completed a study to set up a film office under the Arts and Culture Department. Each of the 7 districts in the province will have a film service centre at municipal level, which will report into the provincial film office. Eastern Cape 8 Source: Deloitte SA Market Research

9. The primary value proposition of local Film Offices and Commissions is to market their regions as locations of choice Comparative Overview: The bodies are seen to be complimentary in promoting the South African audio-visual industry. 9 Source: Deloitte SA Market Research

10. In South Africa, various government-related and privately funded agencies support the audio-visual industry Institutional Arrangements: South Africa Supporting Institutions • NFVF • E.g. • Department of Arts and Culture • Department of Trade and Industry • SARS • MAPPPSETA • National Arts Council of SA • SA Scriptwriters Association • Independent Producers Organisation • Commercial Producers Association • The Producers Alliance etc. National • Gauteng Film Commission • Cape Film Commission • Durban Film Office (covers entire KZN) • Eastern Cape - Arts and Culture • Mpumalanga - Arts and Culture Regional • Departments in Municipalities Local There is a perception within the industry that there is a lack of coordination between key institutions and programmes. 10 Source: Deloitte SA Market Research

11. There are a number of initiativesbeing undertaken at provincial government level to promote the audio-visual industry … Regional Initiatives: • Festivals to showcase films: • Sithengi – November, Cape Town, • Encounters Documentary Festival – July/August, Johannesburg/Cape Town, • Durban International Film Festival, • Loerie Awards – July, different venues in South Africa, • Attendance of international film festivals e.g. Cannes, Montréal, Toronto etc. • Other initiatives include: • Industry workshops held by Film Commissions/Offices, • City of Johannesburg - has identified film as part of its Creative Industries Strategy and has a plan to establish a Film Incubator in Newtown, • Ekhuruleni has shown interest in promoting locations. No initiatives have been implemented to date however. The impact of these regional and other initiatives is difficult to measure as limited data is available. 11 Source: Deloitte SA Market Research

12. … with the GFC engaging in a range of AV activities within Gauteng 6-month Snapshot of GFC Activity: Source: GFC 6-month Production and Marketing Activity Report (Apr – Sept 2007) 12

13. The last 5 years have seen a renewed focus on strategies to grow the national and provincial audio-visual industries National Growth/Development Plans: Key Challenges Some Key Strategies Focus Areas • Skills development. • Audience development. • Access to finance. • Improving coordination between key institutions. • Obtaining critical industry information. • Transformation. • DAC Cultural Industries Growth Strategy, 1998. • Industrial Development Corporation Report, 2000. • NFVF National Value Charter. • Strategy for the Development of the Content Industries, 2003. • Film and Electronic Media Sector Skills Plan, 2004. • Western Cape Province Micro Economic Development Strategy: Film Sector, 2005. • The DTI Draft Sector Development Strategy: Film and Television, 2005. • 2007-2008 Sector Development Skills Plan • Sustainable national industry growth and development. • Enhancement of economic growth and development. • Accessibility to financing. • Development of content for broadcasting and multimedia. • Development of skills in the industry. • Increased competitiveness, exports and investment • Transformation of the industry. The GFC’s key priority areas match the focus areas of other complementary industry strategies. 13 Source: Deloitte SA Market Research

14. South African AV Industry Overview • Institutional Landscape • Key Trends • Industry Growth Drivers

15. The South African AV industry operates is an environment that is rapidly and continuously changing Local Operating Environment: Broadcast Television Commercials • The South African Broadcasting Corporation has: • 3 national channels and an Africa channel. • 2 licenses for regional channels that will broadcast in indigenous languages. • There are two M-Net channels and over 40 DSTV channels. • One free-to-air channel i.e. E.TV. • The Commercials sector is very competitive, with over 50 companies that specialise in TV commercials. • It is an industry driven by production costs relative to the purchase of airtime. • The sector is characterised by high quality output. Facilitation Corporate Video • South Africa has diverse and attractive locations that are sought after by film and commercials producers worldwide. • The Rand / US $ exchange rate has enabled relatively competitive costs for air travel, accommodation etc. • Local equipment, facilities, services and crew are rated amongst the best in the world. • SA has about 50 successful local facilitating producers in. • The making of corporate videos boomed in the 1980’s, when cheap, simple and high quality video cassettes came onto the market. • Estimates are that corporate video makes up a quarter of production turnover in South Africa. Ancillary Services Distribution and Exhibition • The economic multiplier effect of the industry is estimated to be between 2 - 2.5. • International experience has shown that the industry has a positive economic impact. In Australia, the output multiplier is 2.67. • Industries that benefit from the industry include tourism, hospitality, insurance, marketing, tax and legal advisory etc. • New technologies such as digitization have enabled new content delivery channels such as DVDs and online portals. • Digitisation has lead to an increase in small independent companies that can produce for TV due to reduced costs of production and distribution, once the initial expensive capital cost has been incurred. The impact of new technologies on content production and distribution mirrors global trends. 15 Source: Deloitte SA Market Research

16. In 2006, almost R3 billion revenue was generated in the South African audiovisual production industry South African AV Industry Revenue: Nationally, audiovisual industry production is almost equally made up of film, commercials and TV * This is an estimate of the value of AV industry production and includes only revenue generated in the “cost consumption” phase of the value chain. It thus excludes the revenue of the broader media and entertainment industry e.g. box office revenue, advertising agencies revenue, DVD sales etc. 16 Source: Deloitte South African Market Research

17. Over a 3 year period, the bulk of commercials produced nationally were concentrated in Gauteng and the Western Cape Annual Commercials Production Data*: Location No. of Commercials 17 * From Commerical Producers Association (CPA) member data Source: Deloitte South African Market Research

18. South African Gross Box Office Earnings (25 Nov 2005 - 20 Jan 2006) 35 30 25 Earnings (R m) 20 15 10 5 0 King Kong Flight Plan Mama Jack Chicken Little Rumour Has It Legend of Zorro Chronicles of Narnia The 40-year old virgin Cheaper by the Dozen 2 Harry Potter and the G... Movie With very few exceptions, the local box office is dominated by foreign films … Sample Local Box Office Earnings: 18 Source: Deloitte SA Market Research

19. All Time Top 15 South African Gross Box Office Earnings 35 30 25 20 Earnings (R m) 15 10 5 0 TSOTSI MR BONES MAMA JACK SWEET N SHORT FUNNY PEOPLE 2 PANIC MECHANIC MILLENIUM MENACE LIPSTIEK DIPSTIEK THERE'S A ZULU ON .. OH SHUCKS IT'S SCH... OH SHUCKS HERE C... ORKNEY SNORK NIE OH SCHUKS I'M GATVOL GODS MUST BE CRAZY 2 GODS MUST BE CRAZY Movie … with ‘slapstick’ the most successful of local movie genre’s Top 15 Local Films: 19 Source: Deloitte SA Market Research

20. South African audiences perceive local films as being either ‘slapstick’ or socio-political; there is little variety of genre South African Audience Tastes: Positives Negatives • South African youth are keen to watch local films that are relevant to them. • Socio-political films perform better on the arthouse circuit. • International recognition of socio-political films e.g. Tsotsi and Yesterday: • The international success of these films have raised the profile and perceptions of local films. • Low budget films can be successful e.g. ‘Whale Rider’ from New Zealand and “High School Musical’ from the US. • Local films fall into two categories: socio-political or ‘slapstick’. • Lack of variety of content. • South African youth find TV soaps more relevant than local films as they deal with current issues. • Local films are perceived to be focused on the past. • Perceived poor quality, editing and lack of special effects. • Poor acting and use of the “same faces”. • Insufficient marketing of local films. There exists strong potential demand from local audiences for local content if it is of greater variety, quality and relevance. 20 Source: Deloitte SA Market Research

21. In South Africa, cinema attendance is characterised by areas of growth, stagnation or decline Cinema Attendance: • The international experience is that cinema admissions are on the decrease: • In the US, cinema admissions fell from a high of $1.64bn in 2002 to $1.4bn in 2005. • In South Africa, overall attendance is on the rise: • A 4.5% increase in 2002/3, and a 5% increase in 2005/6. • It is anticipated however that with technological convergence, local cinema attendance trends will mirror global trends in the future. • However, there are two phenomena locally: • Cinema attendance is growing in previously under-serviced markets. This is because cinemas have become more accessible due to: • Competitive pricing, • An expanding spatial footprint, primarily in urban areas. • In better serviced markets however, the trend is towards stagnation: • Ster-Kinekor has seen a slowdown in the traditionally lucrative LSM 9 - 10 markets. • Peri-urban and rural areas however still require focused audience development initiatives to grow cinema audiences. 21 Source: Deloitte SA Market Research

22. Countrywide, new content delivery channels are booming due to falling prices of DVDs, computers and cell phones Content Delivery Channels: Local movie theatres may face growing competition from alternative content delivery channels, especially if ticket prices continue to rise. 22 Source: Deloitte SA Market Research

23. South Africa faces impediments to increasing its market share as a globally competitive film-making destination Global Market Share: • It is estimated that South Africa has 0.5% of the market share of the global film, TV and commercials industry1. • The reasons for the country’s relatively low market share are: • “Structural constraints i.e. high volatility, general unprofitability, and monopolised international distribution networks, • Prohibitive film production costs and decreasing levels of private production financing, • Lack of competitiveness relative to competitor countries, • Large volumes of imported material, • Increasing reliance on government funds as a means to protect local content development.” • South Africa’s main regional competitors in the market for African and Middle Eastern content are currently Iran, Egypt, Israel and Nigeria. 23 Source: 1. GFC Business Plan (MEFS) 2007 – 2010; Deloitte SA Market Research

24. The AV industry has had a positive economic effect on the local economy Economic Activity: • The audio-visual industry in South Africa is estimated to generate over R5.5 billion in economic activity annually. • The multiplier effect for the local industry is estimated to be between 2 and 2.5, with spin-offs for the toursim industry e.g. the promotion of filming locations as tourist attractions. • South Africa’s cost advantage in the industry relative to the US and the Europe could continue if the rand continues to be weaker than major world currencies. It is difficult to monitor and evaluate the social and economic impact of the industry due to data limitations. 24 Source: Deloitte SA Market Research

25. South African AV Industry Overview • Institutional Landscape • Key Trends • Industry Growth Drivers

26. There are several factors influencing the growth of the national audio-visual industry Growth Drivers: Audience Development Business Environment and Cost Advantage Regulatory Environment Funding and Incentives Destination of Choice • Infrastructure • Technical • Public Physical Environment Human Resources Capacity 26 Source: Deloitte SA Market Research

27. One of the main impediments to growing the local industry has been poor audience development Audience Development: Background Audience Development Initiatives • Due to previous social, spatial and economic planning inequalities, the overwhelming majority of the population is located in townships with no exhibition outlets. • Geographical distance from movie theatres and ticket pricing has precluded growth in previously disadvantaged groups. • Many South African films are perceived as being too socio-political and do not appeal to the tastes of 16 – 35 year old audiences who want films that reflect their current realities and more variety of content. • The Film Resource Unit (FRU) has partnered with the Department of Arts and Culture, the Humanist Institute for Development Cooperation, the GFC and the Government Communication and Information System to establish community based audio-visual facilities to promote development, communication and active citizen participation. N.B. There was announcement on 20 June 2007 by the Board of Directors of the FRU that it might close down due to financial problems. However discussions were being held with the DAC to resolve the matter. • Movie theatres owners are opening new complexes in previously under-serviced areas, such as the new eight cinema complex in Soweto’s Maponya Mall. • CineMARK is using a mobile unit to take movies to rural areas. • Movie houses are lowering ticket prices as a strategy to attract new movie goers. • Use of digital technology to show 3D films and so attract tech-savvy audiences. • Use of DVDs and other content delivery channels. 27 Source: Deloitte SA Market Research

28. South Africa has an internationally recognised comprehensive and progressive legal framework South African Legislation: • Independent Communications Authority of South Africa Act - in particular, deals with local content quotas, which are viewed as key to developing the local industry. The Skills Development Act - provides an institutional framework for national, sector and workplace strategies to develop and improve the skills. • The Labour Relations Act - due to the proliferation of small firms and unorganised ‘freelance’ labour, the effects of this Act are smaller than in other sectors. • Basic Conditions of Employment Act - to provide for fair labour practices in the workplace. • The Films and Publications Act - distribution of any prohibited film or publication is a criminal offence in terms of the legislation. The Immigration Act – regulates the entry of foreigners to South Africa and the issue of work and residence permits. • The Lotteries Act - provides for payment of lottery money for projects that promote the arts, culture and national historical or cultural heritage. The Income Tax Act – provides a legal framework for tax related matters. The Employment Equity Act - aimed at achieving a diverse workforce that is broadly representative of the South African population. TRIPS Agreement - South Africa, as a member of the World Trade Organisation (WTO) is bound by the Agreement which affords scriptwriters and creators a high standard of copyright protection. The Intellectual Property Laws Amendment Act – provides for the protection of rights of local and foreign companies. The Intellectual Property Laws Amendment Act – provides for the protection of rights of local and foreign companies. Counterfeit Goods Act – provides for the protection against trading in falsifications of merchandise and products. Counterfeit Goods Act – provides for the protection against trading in falsifications of merchandise and products. However there are perceptions that legislation is too rigid and there is limited institutional capacity to implement it. 28 Source: Deloitte SA Market Research

29. There have been a few initiatives to reduce bureaucracy and inconsistent application of rules Concessions: Home Affairs issues a Visitors Visa with concessions for actors and crew. The Visitors Visa must be issued in the country of origin and specifically endorsed with the purpose of entry. The City of Cape Town has abolished film location tariffs on publicly owned Council land. SARS is considering allowing employees in the film industry to apply for a single annual tax directive. . 29 Source: Deloitte SA Market Research

30. There have been a few initiatives to reduce bureaucracy and inconsistent application of rules (contd.) Concessions: • The South African regulatory environment is perceived as onerous for SMMEs. • An 2003 international survey found that 46% of South African respondents said that bureaucracy was a significant constraint on business growth; the global average is 35%. • Uncertainty around the SARS definition of employees and independent contractors is an concern. • Currently the industry defines freelancers as employees; this however has labour law and tax implications. • As employees, freelancers cannot claim for expenses and have to work within legislated hours. However given the nature of the industry, hours worked are often in excess of the prescribed 45 hour week and 9 hours a day. This is in contravention of the BCEA. 30 Source: Deloitte SA Market Research

31. There are a number of commercial and government organisations offering film production financing in South Africa Key Funding Channels: IDC – 31 Movies worth R0.5bn funded in 6 years through equity investments and commercial and venture loans. NFVF Fund – education and training development, production, marketing and distribution. Commercial banks – e.g. Rand Merchant Bank provides funding capped at 30% of a production budget. Other funds that are being investigated for establishment include the SABC Film Fund. Private funding e.g. individual private investors. Government grants- skills training initiatives, sponsorships etc. Funding is potentially a major growth driver as it helps attract industry players to the market. 31 Source: Deloitte SA Market Research

32. Revenue generation guarantee requirements are the largest barrier to access to funding in South Africa Barriers to Funding in South Africa: Broadcaster monopolies on IP ownership limit the income that producers can make from their content. Producers often struggle to meet the stringent revenue generation guarantee requirements of financial institutions. Local banks consider the industry to be high-risk, with few mitigation strategies in place. The combination of high production costs and uncontrollable variables mean financial success is not often guaranteed. Alternative sources of funding such as the National Lottery are not available due to legal restrictions on funding of private ventures. Use of guarantees, pre-selling of rights and other measures to mitigate risk are required locally. Benchmark countries address the issue of risk through the use of public funding bodies at national and local level. 32 Source: Focus Interviews with Key GFC Stakeholders and Industry Experts

33. The Large Budget Film and TV Production Rebate is the primeinvestment incentive available to both foreign and local big budget producers Key Incentives: Large Budget Film and TV Production Rebate Scheme • Eligible applicant rebated a sum totalling 15% for foreign productions or 25% for qualifying South African productions, including official co-productions of the qualifying South African production expenditure that an applicant has spent on an eligible film production. The maximum rebate for a project is R10 million. • The rebate scheme tends to be inaccessible to most local producers as minimum spend production expenditure is R25 million. There are however proposals to lower the rebate threshold to accommodate lower budget productions (<R10m). Section 24F of the Income Tax Act • Enables any activity in the development of a film project to be tax deferrable so as to attract investment. DTI rebates / subsidies for international travel • Provides South Africa manufacturers, including filmmakers, with funds to travel globally to attract funding for projects. International best practice suggests that a variety of film specific incentives are required at national and regional levels and for smaller local productions. A business environment that provides general incentives to encourage business, such as in Ireland, is also beneficial. 33 Source: Deloitte SA Market Research

34. Other incentives are available to support the industry in South Africa Other Incentives: Skills Development Fund • Employers can claim back the Skills Development Levy if they provide training that is MAPPP-SETA accredited. Co-production Treaties • Enables productions from participating countries to apply for benefits or programmes of assistance from both countries. Benchmark countries tend to link incentives to initiatives to build capacity in local industries e.g. skills transfer programs. For instance, rebate schemes could have matching labour grants. 34 Source: Deloitte SA Market Research

35. 30 25 Number of Applications 20 received Number of Applications Number 15 approved Number of Applications 10 paid 5 0 South African Co-prod Foreign As at 24 April 2007, R124 million had been paid from the Large Budget Film and TV Production Rebate Scheme Efficiency of the Rebate Scheme: There appear to be constraints in the payment of rebates to approved applicants, which need to be investigated further. 35 Source: Deloitte SA Market Research

36. The cost of production in South Africa is relatively cheap compared to developed countries, such as in the European Union Cost Advantage: • • South Africa has a shrinking but still tangible cost advantage over developed countries mainly due to the current relatively weak rand exchange rate. This cost advantage is spread across the value chain: • A weak rand makes South Africa more attractive to foreign productions due to lower production costs • A strong rand, whereas unfavourable for foreign productions, may lower the cost of importing skills, equipment, content etc for the local industry. • It is estimated that production costs in South Africa are 60% of USA costs. A 2002 study shows that South African crew rates are 16.9% of that of American crews. • Prices in ancillary industries e.g. hotels, restaurants, domestic flights and car rental are generally competitive. However these have been known to be inflated on occasion for foreigners: • The high cost of travel from the Americas and Europe to Africa is an issue for some international producers. 36 Source: Deloitte SA Market Research

37. South Africa has a vibrant service industry catering to all aspects of the audio-visual industry … Service Providers 37 Source: Deloitte SA Market Research

38. … and a variety of small to medium-sized fully equipped studio spaces Technical Infrastructure: • The studio facilities available in South Africa have technical infrastructure and equipment that is ideal for commercials and low budget films. • A number of technically advanced studios are required in a country so as to attract international productions e.g. both Ireland and Australia have state-of-the art technical infrastructure, which is used to attract big-budget productions. To compete with these countries, South Africa would need to invest in such infrastructure e.g. the Dreamworld Film Complex: • The Cape Town Dreamworld Film Complex is expected to open in 2008. The complex will include four soundstages, four backlots and premises for production, post-production and supply companies. The Dreamworld project should open up opportunities for both local and international filmmakers as it meets international standards for studios. • For post-production projects, security and access to facilities is a big issue due to piracy. Shortening the theatre to DVD window in the country would be a key measure to mitigate the threat of piracy. 38 Source: Deloitte SA Market Research

39. South Africa has well-developed public infrastructure with modern facilities and services available in all major centres Public Infrastructure: • South Africa has a relatively advanced telecommunication industry with one fixed line operator, three cellular network operators and international links fed via submarine cable and satellite networks: • There is conflicting data available on the global competitiveness of Telkom’s rates • Upgrading of national broadcasting infrastructure from analogue to digital at an estimated cost of R2bn will eventually lead to greater efficiencies in the sector and enhance new content delivery channels. • Transportation compares favourable with first world countries – excellent road, rail, sea and air travel services. • South Africa has 3 international airports linking it to more than 59 cities around the world. • Major public and private hospitals have outpatient and casualty facilities for all health care. 39 Source: Deloitte SA Market Research

40. South Africa’s diverse physical environment makes it an attractive location Physical Environment: • 14 hours of sunlight during summer months. • Weather and seasons that alternate with Europe and North America. • Same time zone as most of Europe. • Gauteng offers high density urban infrastructure and architecture and is in close proximity to a variety of natural scenery. • Cape Town offers a variety of coastal scenery and period architecture. • Durban is ideal for tropical settings. • Mpumalanga has numerous nature reserves. South Africa has become a favoured location for filmmakers keen to capitalise on its natural beauty. 40 Source: Deloitte SA Market Research

41. Limited skills data on the South African AV market has restricted our evaluation of the skills set within the industry Human Resource Capacity: • Current data on the audio-visual industry skillset is not readily available. However the following points were noted from a 2004 MAPPP SETA study: • Technological developments mean that skills need to be continuously upgraded. • Significant skills gaps persist in the business, creative and technical fields across all occupations and sub-sectors. • The sector faces the challenge of improving its equity profile, particularly in relation to race and gender in large and medium enterprises. • According to MAPPP SETA, there are seven priority areas for future skills development in the industry. They are: • Asset exploitation and management. • Risk management. • Project management. • Partnership development. • Investor relations. • Marketing and promotion. • Technical expertise. • The largest employment concentrations are found in clerical (16%), technicians and associate professionals (15%), plant and machine operators(15%) and elementary occupations (15%). Temporary staff constitute an important component of the AV workforce at 13%. 41 Source: Deloitte SA Market Research

42. Employment figures in the Commercials sector show a a general decline in overall numbers … Employment Data: Source: Commerical Producers Association (CPA) member data * Approximate figures 42

43. A comparison of two locally produced movies shows a high degree of employee transformation, with most employees working as freelancers Case Studies: • Small, independently funded (local) movie: • Employee no’s: 40 crew, 20 cast, Total = 60. • Employee profile: • 30% women, • 50% black (ACI). • The entire production team consisted of freelance resources. • Budget estimate: ~ R5m • 50% of budget spent on employee salaries, • 25% of budget spent on auxiliary services (car hire, accommodation, security, transport, insurance, equipment hire etc). ... ... • Large, foreign-funded move: • Employee no’s: 431 crew, 99 cast, Total = 530. • Employee profile: • 17% women, • 53% black (ACI). • Only 3 permanent staff (from production company); remainder freelancers. • Only 12 international recruits; remainder local. • Budget estimate: ~ R90m • SA costs ~ 55% of budget, non-SA costs ~ 45%. 43 Source: Deloitte SA Market Research

44. There are also skills gaps that have been identified by stakeholders as needing urgent redress to ensure the continued growth of the local industry Skills Gaps: Lack of coordination, promotion and monitoring of skills-transfer from international and co-productions. Low quality of scriptwriting that does not meet audience needs Lack of business entrepreneurial capacity Limited access to training opportunities for new entrants to the industry Rapid and continual technological changes that require ongoing skills development 44 Source: Deloitte SA Market Research

45. Several public and private sector organisations are providing training programmes to help address identified skills gaps Skills Development Initiatives: • Responsible for administering skills development in the industry using the Skills Development Levy. • Coordination of learnerships and mentorship programmes. MAPPP SETA • E.g. the MultiChoice and Department of Labour Film Skills Development Programme that provides internships for a hundred trainees. Public – Private Partnerships • Offers bursaries for study at training institutions. • Development of Unit Standards • Financial support for training projects. • Investigating the possibility of establishing a National Film School. NFVF • E.g. the Audiovisual Entrepreneurs of Africa, which is a development programme for producers in Southern Africa. • M-Net’s New Directions Scriptwriter and Director Development Programme. Private Initiatives There is however an industry perception that skills development in the sector needs to be better managed by the key responsible bodies. 45 Source: Deloitte SA Market Research

46. Tertiary institutions are also playing a key role in developing the skills required by the AV industry Tertiary Institutions: • A number of tertiary institutions nationally offer professional qualifications (Certificates, Higher Certificates, Diplomas, Degrees, Doctorates) in the AV field, • These courses cover, among others: • Journalism / Photojournalism, • Advertising, • Production, • Media (Operations, Management, Law, Finance etc) • Communication • Creative Thinking • Public Relations • Multimedia Technology • Scriptwriting • These courses cover, among others (cont.): • Directing • Editing • Location hunting etc • Some of these institutions include: • Boston Media House: • Registers +-1500 students annually • Tshwane University of Technology – Pretoria Film School: • Registers +-40 students annually • South African School of Motion Picture Medium and Live Performance: • Registers +- 300 students annually 46

47. From a global perspective, the business environment in South Africa is generally perceived to be supportive of businesses and is conducive for growth Business Environment: • Hospitality • South Africa has a vibrant hospitality industry with many businesses catering exclusively to the film industry. • Business Services • Most major global financial institutions are represented in South Africa e.g. Barclays Bank, Standard Bank, HSBC. • Competitive insurance services are available e.g. Lloyds, Hollard, AIG, Lion of Africa etc. • Corporate governance is strengthened through the implementation of King II recommendations and other governance initiatives e.g. PFMA. • South Africa’s business efficiency has climbed up two places from a ranking of 40 in 2005 to 38 in 2006. This means that the country is improving its innovation, profitability and accountability levels. • The government has made improving safety and security a key focus area: • Official data for the financial years 2004/05 - 2005/06 shows a 9% overall reduction in 21 types of serious crime. • However, there were concerning increases in car hijackings (3%) and car theft and cash in transit heists (74%). Locally, perceptions are that the business environment is not conducive for the growth of SMMEs. 47 Source: Deloitte SA Market Research