Financier IDC blames COVID for Mara Phones woes
National development finance institution, the Industrial Development Corporation (IDC), is weighing its options for the insolvent African smartphone maker Mara.
In a statement, the IDC says it is open to listening to offers from other interested parties to take over the Mara Phones smartphone manufacturing facility based at Dube Trade Port Special Economic Zone in KwaZulu-Natal.
This, after reports emerged this week that the high-tech facility is “empty and on auction”, with the sale mandated by Standard Bank and the IDC – financiers of the smartphone factory.
Standard Bank and the IDC provided around R100 million and R238 million, respectively, to fund the Mara Phones factory.
ITWeb understands that a management buyout is on the table for the Mara Phones smartphone manufacturing plant.
Sources close to the matter also indicated Mara employees have not been paid their salaries since last year, as the factory is now being auctioned.
The IDC explains that Mara Phones South Africa, which is part of the global Mara Corporation and domiciled in Dubai, United Arab Emirates, launched its operations in South Africa in 2019, after which it established the state-of-the-art manufacturing plant.
At the time, Mara Group founder and CEO Ashish Thakkar highlighted that while a few smartphones are assembled in Africa, nothing is truly being manufactured on the continent.
As a result, he pledged R1.5 billion at the Africa Investment Forum, saying it would go towards establishing SA as a manufacturing hub of Africa’s “first high-tech, high-quality and affordable” smartphones.
The IDC notes Mara Phones set out to position Africa as a world-class manufacturing hub of high-tech products to locally manufacture low-cost, high-quality mobile smartphones.
In addition to the South African operation, Mara Corporation has a similar smartphone production facility in Rwanda, says the organisation.
“At implementation, the total funding for this project, which was intended to create 450 jobs over five years, stood at R492 million. As a senior lender, the IDC approved total facilities amounting to R238 million.
“Mara Phones shareholders were not able to raise their full contribution. As such, the shortfall was provided by another local financial lender,” says the IDC.
It adds that production at the KwaZulu-Natal facility commenced during October 2019 but was disrupted in early 2020 due to the worldwide COVID-19 pandemic and the hard lockdown.
According to the organisation, consequently, the production volumes were impacted and were below target.
“Despite the quality of its products, Mara Phones struggled to penetrate the South African market in which other global brands and other lower-cost smartphone competitors are firmly entrenched. In addition to battling to meet its production targets, the business was adversely affected by business disruptions in the wake of the pandemic, after which the company ceased its operations in July 2021.
“Regrettably, the IDC has established that in the absence of further capitalisation of Mara Phones, there is no case to be made to inject further debt funding into the company,” it says.
Notwithstanding this, the IDC says it is exploring other options, given its developmental mandate and other options that interested parties may offer.
Speaking on 702’s The Money Show with Bruce Whitfield, Keith Green, manager at Park Village Auctions in Durban, revealed the company had been entrusted to dispose of Mara Phones’ assets on behalf of the financial entities.
“We have elected to rather do it on offer basis rather than an auction basis, in order to procure the correct buyer and also give the potential purchases time to do their due-diligence, in order to procure or purchase the equipment due to its specialised nature.”