South Africa's indigenous films often do well at the box office; the biggest star Leon Schuster's broad slapstick comedies, for example, regularly trounce Hollywood competition. Yet local production virtually ground to a halt last year when the National Film & Video Foundation's (Nfvf) $5.6m (r37m) budget was slashed by a third despite the success of Tsotsi and U-Carmen E-Khayelitsha. It was a huge blow, but this year the funding was reinstated. "We're back where we were," says Ryan Haidarian, Nfvf's head of production and development.

But optimism is growing. On top of funding from the Nfvf and the government-owned development bank Industrial Development Corporation (IDC), which invests in local films and international co-productions, there is also an anticipated Department of Trade and Industry (DTI) revamp, which is expected to drop the qualifying expenditure for its tax incentive to $1.8m (r12m) while increasing the rebate for local films and South African co-productions to 35% for the first $900,000 (r6m). There is real hope that homegrown production levels can equal the 15 films made in 2004-05.

"It would leverage us up immensely," says Jeremy Nathan of production outfit Dv8 Films. "We'd have the beginnings of an industry and the best will travel."

Nathan's Dv8 produced Bunny Chow, a tale of three stand-up comedians road-tripping to South Africa's biggest rock festival. It played well at festivals last year, and its writer-director John Barker is developing two more projects with Nathan: The Dictator, a satirical jab at a Robert Mugabe-like dictator, and The Umbrella Man, a period comedy set against the backdrop of a true-life minstrel carnival, which Barker has submitted to the Sundance Lab.

"There's a lot of young independent film-makers here," says Barker. "We just need to start making films."

Other recent productions include Mark Dornford-May's follow-up to U-Carmen, Son Of Man, a Christ allegory set amid African genocide that matched Goodbye Bafana with eight nominations at the second annual South African Film and Television Awards; Jerusalema from UK-based director Ralph Ziman, about the rise of a Sowetan gangster; the Australian-South African co-production Disgrace, based on the JM Coetzee novel and starring John Malkovich as a Cape Town professor who gets entangled in post-Apartheid politics; and Spoon, a supernatural thriller co-directed by Sharlto Copley and Simon Hansen, about an ordinary guy who discovers he has telekinetic powers.

"It reminds me of early Shyamalan," says Haidarian. Nfvf is co-financing Spoon alongside Anant Singh's Videovision Entertainment, one of the country's leading independent distributors and producers.

Videovision is also behind prolific South African film-maker Darrell Roodt's latest, Prey, about an American family terrorised by lions on safari.

Ross Garland's Rogue Films is distributing Big Fellas, a satirical comedy about white wannabe film-makers travelling to Johannesburg, nationwide on November 23; the film stars Hakeem Kae-Kazim, whose credits include Hotel Rwanda. Also on Rogue's slate are Confessions Of A Gambler, about a Muslim woman with a gambling addiction, premiering at the Dubai International Film Festival in December, and Spud, an adaptation of John Van de Ruit's South African bestseller about a 13-year-old Afrikaaner boy at an elite boarding school on the eve of Mandela's release. Garland is hoping to negotiate a co-production deal on the back of the book's recent US launch.

The first film to shoot under the new UK-South African co-production treaty, ratified earlier this year, is Skin by UK writer-director Anthony Fabian. A co-production between Bard Entertainments and Elysian Films, with a fifth of the budget coming from the IDC, Skin focuses on the true story of Sandra Laing, a black girl born to white Afrikaaner parents during the Apartheid era. The film, which is being shot in Johannesburg, stars Sophie Okonedo, Alice Krige and local star Tony Kgoroge.

More black talent is coming through, too. Sunu Gonera, a commercials and short-film director whose feature debut is Lionsgate's swim-team drama Pride, starring Terrence Howard, is looking to return next year to shoot his second feature. And Dv8 has Khalo Matabane's State Of Violence ready to shoot, pending the DTI's rebate scheme announcement. A contemporary revenge tale about a black Johannesburg businessman seeking his wife's killers, Nathan says the film follows the Tsotsi formula of combining social conscience with a commercial sensibility.

Private equity, however, is still short on the ground for an industry that has yet to prove it can offer a decent return on investment. "It takes a Crocodile Dundee, like Australia had, to unlock serious equity locally," says David Wicht of co-production facilitators Film Afrika, "and we haven't had anything like that."