Cape film industry adds R3.5bn to GDP

These key findings come from a baseline study commissioned by the Cape Film Commission (CFC) and conducted by Barry Standish, economist at the UCT Graduate School of Business (GSB) and Antony Boting, a consultant at Strategic Economic Solutions and MBA graduate of the UCT GSB.

According to Standish, this is the first time that this type of research has been undertaken in the film industry in South Africa and it will assist in monitoring the size and growth of the industry, and strengthening its competitive advantages and skills.

"Important contribution"

“The South African growth initiative ASGISA has a target GDP growth rate of 6% plus for the country as a whole. The film making industry is seen as one industry that would make an important contribution to achieving this growth rate,” says Standish.

“This study, which the CFC intends to conduct on an annual basis, will provide strategic direction to the industry for the purpose of growing local and international competitiveness.”

The study found that the total turnover of the Western Cape film industry is estimated at R2.65 billion for the 2005/6 financial year of which about 77% (R2.03 billion) occurred in Cape Town. Of the R3.5 billion contribution to SA GDP, long form productions contributed R1.49 billion, commercials R1.16 billion and stills R0.9 billion.

The Long form, with a turnover of R1.12 billion, was the largest part of the industry. This is followed by commercials at R0.87 billion and stills at an estimated R0.66 billion. Inside of long form, feature films added R934.3m and made-for-TV productions R181.3m.

Service commercials are the most numerous and are the largest part of the commercials industry, followed by local commercials and then international commercials. Service commercials had a total turnover of R631.8 million, compared to the R162.5 million for local commercials and the R77.9 million for international commercials.

Job creation

In addition to contribution to GDP, the other major macroeconomic contribution looked at was the creation of jobs.

It is estimated that the film industry created at least 6058 full year job equivalents in the Western Cape, while a further minimum 2501 indirect jobs were also created in the province.

Of the 6058 direct jobs, 1841 were in long form, 2459 from commercials and 1758 in stills. It is estimated that about 4638 (77%) of these direct jobs are in Cape Town.

In total, between 7.9 and 8.2 direct and indirect jobs are created in South Africa for every R1 million spend on production. Of these jobs, between 2.6 and 3.8 are in the Western Cape and between 2.0 and 2.9 are in Cape Town.

Catering and accommodation, which is an employment intensive sector, has the most film-related indirect jobs, followed by the business services sector, the general business sector and then the financial institutions and insurance services. The machinery and equipment renting and leasing sector is fifth. These five sectors together account for nearly two-thirds of all the indirect employment created from film related business.

The study also found that the film industry is an important contributor to bed nights in SA – at least 313 576 bed nights were generated throughout SA. Of this, at least 252 000 bed nights were generated in the Western Cape in 2006 from the film industry – this represents 10.7% of the estimated 2.36m business bed nights in the province.

Other key thrusts

Standish said that one of the other key thrusts of the study was to identify the cost components of the industry and to use these to establish a value chain analysis. A value chain is an analytical approach to maximising the competitive advantage of a business or industry.

It was found that production costs make up 73.5% of all costs for the entire industry. This is followed by ‘other' (22.2%) (this includes insurance, contingencies, profit, office overheads, etc), post-production (2.7%) and pre-production (1.6%).

In long form, the five largest cost components make up 70% of overall spending. These are crew remuneration (25.6%), travel and living expenses (19.8%), camera hire (10.9%), set lighting (7.2%) and vehicle hire (6.9%).

For commercials, the five largest cost components contribute 74.7% of total spending. These are crew remuneration (26.9%), equipment hire (17.8%), art department expenses (13.3%), locations (8.9%) and talent fees (7.7%).

In the stills sub-sector the five largest cost components contribute 78% of total spending. These are talent remuneration (20.7%) general expenses (production costs – 17.7%), travel and living expenses (16.0%), crew remuneration (13.6%) and camera hire (9.6%).

Potential change in industry

Lastly, an analysis was done on the potential change in industry costs for a depreciation in the Rand and an increase in wages. It was found that a 10% depreciation in the rand could reduce costs by 8.02% in long form, 8.15% for commercials and 8.06% for stills. Similarly a 10% increase in wages would result in cost increases of between 3.9% and 4.5% for the different sectors.

Standish added that many areas were identified where rigorous analysis was not possible or where detailed measurement could not be made.

“A rigorous baseline of information and analysis has been set in place, however, which provides a solid platform for future monitoring and strategic enterprise development.”