POLICY BRIEF ACCESS TO CAPITAL AND BUSINESS EXPERTISE IN FOR THE FILM AND MUSIC INDUSTRIES IN TANZANIA (DECEMBER 2016)
Executive Summary This policy brief is a product of Research in Culture and Creative Industries focusing on the film and music sub-sectors contribution to creative economy in Tanzania and EAC Common Market that is being implemented by Culture and Development East Africa (CDEA). This policy brief has been published with funding from Danida. One of the tasks of this research was to identify innovations, bottlenecks and opportunities for business enterprises in film and music linked to accessing access to capital and business expertise in Tanzania. The research established the following innovation, bottlenecks and opportunities within the East African region. Innovation Innovative Capital: The Heva Fund in Nairobi, Kenya is a business model that is operating in the music, design and photography sectors that will soon begin investments in businesses operating within the fashion, commercial photography, crafts and interior design value chains. Heva Fund plans to invest in selected creative sectors in Tanzania in 2017. Bottlenecks Commercial banks, investors and business development experts do not understand the business models of the creative industries. The banks and investors consider creative businesses risky averse, but the business incubators in Tanzania are yet to appreciate how the creative value chain operates Opportunity Crowd funding sites are gaining ground in the creative sector help gathering small-scale investors, for example, for independent film financing or through social impact investment from foundations that have a shared social vision and just return on investment. The primary audience for this policy brief is the Ministry of Finance and Planning and Ministry of Trade and Industry in Tanzania.
However, this brief will also be shared with other key stakeholders who include: • Commercial Banks • Development organizations supporting the creative industries • Corporate organizations who have sponsored the creative industries • Business incubators and accelerators • Investment funds e.g. Mkoba Private Equity Fund • Private sectors e.g. Tanzania Private Sector Forum (TPDF) • Start-ups in film and music The policy brief recommends policy interventions to address the bottlenecks: Financial Engineering Mechanisms o Government should provide an enabling environment for financial institutions to introduce new risk profiles that are specific and appropriate to the creative sector. o In addition, there is need for public private partnerships to make impact investments as an innovation that could serve to mitigate the risk profiles and maximize impact outcomes from the film and music industries in Tanzania. Availability of Seed and Venture Capital for Film and Music Companies o There is need for policy measures that promote creative innovation that attracts social impact investments from a cross-section of stakeholders which includes seed funds and collaborative funds and incubator support funds. Policy Measures Supporting Creative Start-Ups and SMES o There is need for the Ministry of Information, Culture , Arts and Sports (MICAS) to capture issues related to the creative economy and linkages to relevant ministries such as the Ministry of Trade and Industry in the new National Arts Policy being drafted o There is need for the Ministry of Finance and Planning in collaboration with MICAS to revise the
to revise the text on the creative industry in the Second National Development Plan 2016 -2021
music industries that are at the precursor and embryonic stages of development.
o There is need for Tanzania to domisticate the EAC Creative and Cultural Industries act so that it can support the development of Audiovisual Production companies, with support from the Tanzania Investment Center (TIC).
The two stages of industrial development are associated with the following bottlenecks
• According to the East African Community Creative and Cultural industries Bill, 2015 that was passed in August 2015, if domesticated by the government of Tanzania, Tanzania will provide an enabling environment for the establishment of cultural infrastructure as illustrated below. (2) Where an approved producer referred to under subsection (1) is desirous of establishing facilities for the production of audio-visual and motion pictures that approved producer shall be (a) Allowed to set off approved capital expenditure incurred on such facilities against income derived from the audio-visual and motion industry over a period of 10 years commencing in the year following completion of the facilities; (b) Exempt from the payment of property transfer tax on the initial purchase of any property acquired for the specific purpose of providing such facilities; (c) Eligible for interest rate subsidies on funds borrowed from the private sector lending institutions for the establishment of such facilities. 2. Statement of the Issue/Problem: Culture and Development East Africa (CDEA) is implementing a project titled: ‘Research in Culture and Creative Industries focusing on the film and music sub-sectors contribution to creative economy in Tanzania and EAC Common Market’ that is supported by Danida. A key research output is Tanzania Film and Music Industries: Analysis of Industry Specific Framework Conditions Relevant for Growth and Investment, which provides an outlook, highlights the positioning of both film and music sector in T anzania in industry development. The research study on framework conditions of industrial growth (CDEA, September 2015), established the start-ups and SMEs in the film and
Lack of Guarantee Systems Across the value chain for music and film industries, finance has proven to be a great challenge. There are no guarantee systems from development bank to commercial banks to support any segment of the creative sector. Currently, the production of Bongo movies is dominated by funding support from STEPS, a distributor of films in Tanzania, ranging from TZS 10m -30m for budget film production. The music sector is mostly self-funded. Policy Measures Supporting Creative Start-Up Companies There are no policy measures that promote creative innovation that attracts social impact investments from a cross-section of stakeholders which includes seed funds and collaborative funds and incubator support funds. Availability of Seed and Venture Capital for Film and Music Companies There is no venture capital for film and music companies in Tanzania, such production houses and recording studios, many of which are at the embryonic stage. 3. Background (of the problem): In recent years, there has been growing emphasis on the increasing importance of Tanzania’s creative industries to the economy. With the admitted potential for commercial output of the creative industries, as revealed in the “Bongo Flava” and “Bongo movies” industries, there are also many challenges as regards to the design and delivery of support structures to improve the production and delivery of cultural goods/products and services to the larger global market. There is therefore need to provide a basis for determining the best strategies for enhancing creative industries performance in the Tanzanian economy.
The Tanzania Investment Centre (TIC) has identified broadcasting as a key priority investment sector. It points out investment opportunities like creating mainstream television programmes for international market and provision of local content television channels for local market. However, there is no study that raises the question regarding how the private sector can leverage these opportunities to invest in the creative economy in Tanzania. CDEA’s research publication titled: Tanzania Film and Music Industries: Analysis of Industry Specific Framework Conditions Relevant for Growth and Investment, highlights the bottlenecks, opportunities and innovations related to access to capital and business expertise.
4. Statement of CDEA’s interests in the issue: CDEA’s mission is to facilitate multi-stakeholders to use culture as a resource to stimulate innovation and find solutions for sustainable production and lifestyles. As a service provider, CDEA aims to contribute to improving the policy environment for investment in film and music sectors, so that the business can shift to the next stages of industrial development that can attract venture capital and enable the two sectors to be commercially sustainable.
5. Policy Recommendations: Financial Engineering Mechanisms o Government should provide an enabling environment for financial institutions to introduce new risk profiles that are specific and appropriate to the creative sector. o In addition, there is need for public private partnerships to make impact investments as an innovation that could serve to mitigate the risk profiles and maximize impact outcomes from the film and music industries in Tanzania. Availability of Seed and Venture Capital for Film and Music Companies o There is need for policy measures that promote creative innovation that attracts social impact investments from a cross-section of stakeholders which includes seed funds and collaborative funds and incubator support funds. Policy Measures Supporting Creative Start-Ups and SMES o There need for the Ministry of Information, Culture , Arts and Sports (MICAS) to capture issues related to the creative economy and linkages to relevant ministries such as the Ministry of Trade and Industry in the new National Arts Policy being drafted o There is need for the Ministry of Finance and Planning in collaboration with MICAS to revise the text on the creative industry in the Second National Development Plan 2016 -2021 o There is need for Tanzania to domesticate the EAC Creative and Cultural Industries act so that it can support the development of Audiovisual Production companies, with support from the Tanzania Investment Center (TIC). • According to the East African Community Creative and Cultural industries Bill, 2015 that was passed in August 2015, if domesticated by the government of Tanzania, Tanzania will provide an enabling environment for the establishment cultural infrastructure as illustrated below. (2) Where an approved producer referred to under subsection (1) is desirous of establishing facilities for the production of audio-visual and motion pictures that approved producer shall be (a) Allowed to set off approved capital expenditure incurred on such facilities against income derived from the audio-visual and motion industry over a period of 10 years commencing in the year following completion of the facilities;
(b) Exempt from the payment of property transfer tax on the initial purchase of any property acquired for the specific purpose of providing such facilities; (c) Eligible for interest rate subsidies on funds borrowed from the private sector lending institutions for the establishment of such facilities.
5.1 Primary Target Audience Stakeholders
Capacity issues
Action Points
Ministry of Finance and Planning
Enabling the Fiscal and legal policy environment on creative Intellectual Property (IP)
Introduce new risk profiles that are specific and appropriate to the creative sector
Commercial banks
New risk profiles for creative industries
Extend consensual loans to film and music sector businesses
Consortium involving private sector, development partners and public sector
Impact investment
Long term investment to enhance industrial development
Development organizations
Provide seed funds, incubator support funds
Mixed funding comprising of grants and loans
Business incubators and accelerators
Capacity support
Business support development (Documentation and track record, IP services to SMEs such as prepping for investor readiness -valuation of IP assets, IP asset management, IP due diligence and IP Audit-IP for financing, brokering to angel investors, brokering to new audiences/markets)
Ministry of Information, Culture, Arts and Sports (MICAS)
Capture issues related to the creative economy in National Arts Policy
o Make linkages to relevant ministries such as the Ministry of Trade and Industry
Ministry of Finance and Planning in collaboration with Ministry of Information, Culture, Arts and Sports (MICAS)
Accurate interpretation of the creative industry
Revise the text on the creative industry in the Second National Development Plan 2016 -2021
The parliament of the United Repbulic of Tanzania and Tanzania Investment Center (TIC)
Domesticate the EAC Creative and Cultural Industries Act
Support the development of Audiovisual Production companies
6. Sources Consulted or Recommended: 1. CDEA (2016): Tanzania Film and Music Industries: Analysis of Industry SpeciďŹ c Framework Conditions Relevant for Growth and Investment 2. Jaiya. G.S, Managing Intellectual Property Assets for Enhancing Competiveness of SMEs, WIPO, The Small and Medium Sized Division, power point presentation 3. Nurse, K (2016): Study conducted on alternative and innovative funding mechanisms for ACP
For more information : Ayeta Anne Wangusa Executive Director CDEA-Culture and Development East Africa, Plot No. 421, Nyumba Na.1001, Mikocheni B, P.O.Box 13355,Dar es Salaam, Tanzania. Phone +255 22 2780087; Tel : +255 784856866 Email : Ayeta.Wangusa@cdea.or.tz Ayeta_Wangusa@yahoo.com Cdea.Tanzania@yahoo.com
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