2 March, 2002

PRESENTATION TO THE

PORTFOLIO COMMITTEE for Arts, Culture, Science & Technology

PRESENTATION TO THE

PORTFOLIO COMMITTEE for Arts, Culture, Science & Technology

DRAFT NFVF STRATEGYDRAFT NFVF STRATEGY

2 March, 2002

STRATEGIC MODELSTRATEGIC MODEL

HISTORY

&

STATUS QUO

HISTORY

&

STATUS QUO

NORMATIVE STRATEGY (CABINET MEMO)

NORMATIVE STRATEGY (CABINET MEMO)

CHANGE IN THE LEGAL AND EXTERNAL

ENVIRONMENT

CHANGE IN THE LEGAL AND EXTERNAL

ENVIRONMENT

STRATEGIC FOCUS

AREAS FOR THE COUNCIL AND

THE EXECUTIVE

STRATEGIC FOCUS

AREAS FOR THE COUNCIL AND

THE EXECUTIVE

NFVF RESPONSE

NFVF RESPONSE

• Old Strategic

assumptions• Historical Issues• Key Successes• Learning Curve• Business Plans• Performance

assessments• Impact evaluation

• Policy• Regulation• Legislation• Government• Operational• Organizational

to balance the past, present and future

2 March, 2002

QUICK VICTORIESQUICK VICTORIES

Integrated Marketing Campaign (IMC) to position the sector- Industry Promotion

- Communication of Victories (Multimedia)

- Celebrate the Stars (Rags to Riches stories) Buy in for NFVF Strategy Develop Key Partners Base List NFVF/Mnet New Directions Agreement NFVF/MAPPP-SETA MoU NFVF/SABC MoU

R50m of Economic Value Added [EVA]R50m of Economic Value Added [EVA]

2 March, 2002

DEFINING STRATEGIC IMPERATIVES

DEFINING STRATEGIC IMPERATIVES

Re-Invention

Time: Post-2022Focus:

Feasible Revenues: R10 bn

Founding

Time: 1997 - 1999Focus: Implementation of the Act

Spend: DACST

Maturity

Time: 2007-2022Focus: Sectoral Rationalization

Feasible Revenues: R3 bn

Rapid Growth

Time: 2002 - 2007Focus: Sectoral DevelopmentExpansion, Market Penetration,

New Services & Capital Formation Feasible Revenues:

R325m p.a

Forming & Establishment

Time: 1999 - 2001Focus:

Institutional Development-Spend: R2.675m (25%)

NFVF Organic

Life Cycle(Stages of Development)

2 March, 2002

NORMATIVE STRATEGYNORMATIVE STRATEGY

Legislative Environment (Cabinet Memo)

Convergence of ICT’s (Information and Communication Technologies)

INDABA 2001 Research and ReportForging common understanding on industry

challenges and possible solutionsA working conference to endorse action

plans for the development and promotion of the South African film and television industry

Normative Strategy: is the morality, legislation and megatrends on which overall strategy is based

Normative Strategy: is the morality, legislation and megatrends on which overall strategy is based

2 March, 2002

STRATEGIC THRUSTSTRATEGIC THRUST

is about gathering momentum and energy, and launching and projecting ourselves into the future. NFVF needs to make a quantum leap to move from the establishment phase to rapid growth. There is no doubt that leap-frogging forward will bring with it new demands and stresses.

2 March, 2002

COMPETENCY PROFILINGCOMPETENCY PROFILINGMulti-disciplinary competency is an absolute requirement in order to

make the quantum leap to rapid growth

NFVF Personnel

Social Networks

•Professional Affiliation•Government Relations•Industry Relations•Organized Communities•Global Networks Ethos

•Ethics•Morals•Code of Conduct•Beliefs

Know How

• Skill•Intellect (wetware)•Technology software/hardware•Social Facilitation•Functional Competencies•Business Plan•Strategic Plan

Know What

•Economics•Culture•NFVF Pertinent Laws•Business Planning•Strategic Planning

2 March, 2002

In SA, there is no formal definition of ‘film.’

This creates a difficulty in defining the agency (reason for existence) and the mission of NFVF. Implicit in the following definitions are some form of open-ended orientations.

The agency and the mission of NFVF can only be substantiated when such a definition is formulated and legislated.

National Context Definition:

•There is a prerogative to define film in a national (South African) context.

•It needs to be clearer whether definition is classified in terms of ‘moving image’ or technology.

•It must also be aligned to international definitions and must be useful in facilitating co-production agreements.

MISSION ISSUESMISSION ISSUESDefinition of “FILM”

2 March, 2002

Legislated Definition (CANADA-SA Co-production Agreement): an “audio-visual co-production” is a project, irrespective of length, including animation and documentary productions, produced either on film, videotape, or videodisc, or in any other format hitherto unknown, for exploitation in theatres, on television, videocassette, videodisc or by any other form of distribution.

Australia-Germany Co-production Agreement (Technology independent): ‘film’ means an aggregate of images, or of images and sounds, embodied in any material.

UK Film Council: ‘film’ encompasses all moving image media whether originated on film, video or multimedia formats.

MISSION ISSUESMISSION ISSUESDefinition of “FILM” continued

2 March, 2002

STAKEHOLDERSSTAKEHOLDERS

Agency is prescribed by the aspirations of the stakeholders that are served by the Foundation. Stakeholders can be both an asset and a liability to any organisation. The art of leadership is to balance the stakeholder-imposed constraints to any organisation.

Therefore NFVF needs to demonstrate leadership by having a strong sense and understanding of diverse stakeholders and their needs. It is imperative that the annual report covers the extent to which diverse stakeholder needs have been met and show the costs incurred in that regard. This will be clear in the proceeding paragraphs where the financial statement model designed in line with the PFMA are discussed.Stakeholder matrix

2 March, 2002

CONSUMER MARKET ANALYSISCONSUMER MARKET ANALYSIS

Sectoral Service Delivery Measurement

Consumer Markets form a major base of any sector. It is the consumers who vote with their money for products and services. It is therefore necessary that the film sector addresses itself to film consumerism in a highly rational manner to cover all sectors of society, in South Africa and abroad.

Credible instruments of market segmentations need to be used to ensure that no consumer community is excluded from film as it has been the case in the past.

LSM’s

2 March, 2002

GOVERNMENT MARKET ANALYSISGOVERNMENT MARKET ANALYSIS

• Tax structure that has worked well in SA to generate FDI & LDI

• How transferable is it to the film industry• What is unique to the film industry that needs to be

exclusive• Rationale: NFVF must establish clear value chain and

multiplier effect breakdown• NFVF commission a study on the benefit structure• Stop using tax as revenue stream by filmmaker, but use it

as a capital investment• SA, DACST, DTI, STATS-SA must strive to an international

benchmark• Funding Ratio: between Government, Investment

companies, and other financial sources• NFVF is intent in pulling industry out of embarrassing

profile based on exploitation of the past.• DOC should have a film as part of multimedia desk

Tax RegimeTax Regime

2 March, 2002

GOVERNMENT MARKET ANALYSISGOVERNMENT MARKET ANALYSIS

•Culture is a concurrent competency per spheres of government-National, Provincial, and Local

•Discussion of government’s role in industry normally centers around prerogatives of national government and forgetting provincial, to a greater degree forgetting the local government

•NFVF will work with provincial government to formulate budgets and monitor expenditure

•NFVF & DACST will engage ministry of Local government to explore fiscus opportunities such as Local economic Initiatives (LEI’s) to stimulate municipal film economy.

Sphere of Provincial GovernmentSphere of Provincial Government

2 March, 2002

GOVERNMENT MARKET ANALYSISGOVERNMENT MARKET ANALYSIS

•In order for the film sector to feature well in the macro economic equation which is expressed in the formula:GDP = Private Consumption + Government Consumption + Net Investment

•Consumption by Government must be well profiled. Every government department has got communication campaigns where film has not been utilised effectively as a medium of communication by government

•This is a paradox for a country such as South Africa which experiences an image crisis.

•The NFVF proceeds to rapid growth, consumption by government will be a focus area to generate revenues.

•In the life cycle, the figure of R325mil is made plausible by this consideration

Consumption by GovernmentConsumption by Government

2 March, 2002

CAPITAL FORMATION STRATEGYCAPITAL FORMATION STRATEGYIt has been maintained throughout this strategy that additional sources of capital need to be identified. Options to be explored include the following: • TV License Fees-film generates content for the broadcasting industry. The analysis

of the value chain at factors of production through which the film sector contributes to the economics of the broadcasting industry needs to be done. It is clear that all previous discussions and documents on the value chain analysis of the industry have focused on forward and lateral integration. Discussions on backward integration, that is at factors of production of content have been minimum. This issue needs to be addressed. A concrete example is the value chain in the production of bread (the figures presented below are illustrative):

1. Wheat Farmer (10%)

2. Co-operatives (5%)

3. Milling Companies (40%)

4. Bakeries (30%)

5. Retailers (15%)

6. Consumers R3.50

2 March, 2002

CAPITAL FORMATION STRATEGY continued

CAPITAL FORMATION STRATEGY continued

The total economic value created through broadcasting can only be fully realised through a vastly improved collection system for TV license fees. SARS has demonstrated the benefits to society of an improved tax collection system. To conclude on this matter we believe that careful analysis of value created will indicate that there are some elements which are attributable to film.

Cinema - In order to generate development capital, another method could be a levy on cinema ticket sales. We must investigate the elasticity of demand on tickets. The exhibitors could be the collecting agents.

Ad Valorem Tax - The structure of ad Valorem tax needs to be analysed and the portion attributable to film needs to be identified.

Lottery Fund – Lottery Fund presents a readily available source of capital.

To conclude, these sources of capital all need to be explored in conjunction with all other sources of capital discussed in this document. These include development funding which can be obtained through:

(i) European Union(ii) European Bank for Development(iii) European Program for Reconstruction and Development

These funds need to be accessed through cooperation with other government departments. The NFVF can also employ the services of international funding agencies.

It is clear from this strategy how rapid growth can be capitalised. The sourced capital will be employed to fund the Film and Video Initiative and the Film Development Fund. NFVF will explore other avenues for investing capital created (other than parliamentary allocation) for return.

2 March, 2002

OPERATIONAL STRATEGYOPERATIONAL STRATEGYThe operational strategy including governance of NFVF, presents the key structures, functions, and processes that drive the normative strategy, fuelled by the strategic thrust. These structures, functions, and processes are explicit and implicit in policy and legislation.

GOVERNANCE STRUCTURE

Council (9-14)

Chairperson

Executive Committee (< 6)

Council Committees

Advisory PanelsChair: Member of Council

+Experts (< 5)

MINISTRIES:

DACST

DTI

DOC

Portfolio Committee

Provincial Government

Executive Management

Finance

2 March, 2002

OPERATIONAL STRATEGYOPERATIONAL STRATEGYThe structure of the executive management is in line with Section

3 of the NFVF Act, Amendments, PFMA.

EXECUTIVE MANAGEMENT

Chief Executive Officer

Economic Desk(a);(b);(c)

Industry Relations

(a);(d)

Government Relations & Policy

(b);(d);(e)

Business Development(a);(b);(d);&

(NFVF Amendment)

Marketing Office(a);(c);(d)

Human Capital Development

(d);(d);(e)

Finance & Funding(PFMA)

PROGRAMMES & PROJECTS MANAGEMENT

Corporate Services(Legal Admin &

Personnel)

National Film Commission

2 March, 2002

TACTICAL STRATEGYTACTICAL STRATEGYTactical strategy consists of programmes which will be executed. These programmes are spelt out in the DACST Strategy Document

Programmes to realise priorities

1. Film & Video Initiatives

2. Audience Development

3. Training & Development

4. Research & Development

8. Establish a National Film School

9. Produce 6 Feature Films per year

7. Establish National Film Commission

6. Establish Provincial Film Commissions

10. Establishment of a legal entity (Amendment 27)

5. Consolidate International MoU’s

2 March, 2002

BUDGET 2002/2003BUDGET 2002/2003Key objective

INCOMEa) State Contributionb) Fundraising and Marketingc) Investment Incomed) Sales of Services

TOTAL

EXPENDITUREa) Training and Bursariesb) Research and Developmentc) Productiond) Distribution and Marketinge) Operational Expenditure

TOTALSURPLUS/DEFICIT

R

18 186 0002 500 000

100 000100 000

20 886 000

2 307 0003 075 0005 382 0004 613 0004 953 000

20 330 000556 000

2 March, 2002

In ConclusionIn Conclusion

THE ENDTHE END

We look forward to a Strong Future We look forward to a Strong Future