Mara Phones at a Gauteng government handover event, in 2020. (Photo by Sharon Seretlo/Gallo Images via Getty Images)
- South Africa’s first smartphone factory has gone under despite a R100 million tax break.
- Mara Phones’ factory has been put on auction by its funders.
- Government granted it a hefty tax incentive under a since-disbanded scheme, and promised to give Mara preference when it bought cellphones until at least 2026.
- For more stories, go to www.BusinessInsider.co.za.
The first smartphone factory, launched with considerable fanfare in 2019, is for sale after being taken over by its funders.
But its failure was not for lack of government support.
Mara Phones was granted a R100 million tax break, and had the promise that the government would give it preference when any of its departments bought cellphones until 2026.
In February 2020, Mara received approval under the now-defunct Section 12I tax allowance programme, government documents show.
In return for a greenfields investment of some R350 million, the government agreed to forgo potential revenue it calculated at R101,300,865.
Today, the factory is on auction for whatever the highest bidder will pay, with the hopes that it will be sold as a going concern, but with its individual pieces of equipment also on offer if no single buyer can be found.
See also | In 2019, SA celebrated its first smartphone factory. Now it is empty and going on auction.
The Section 12I tax incentive scheme supported greenfields ventures or investments in new industrial projects that used only new manufacturing assets. It also catered to brownfields projects that expanded or upgraded existing industrial projects.
Under the scheme, businesses could get back up to 55% of the amount they invested in buildings and equipment in the form of a tax deduction.
Mara CEO Ashish Thakkar had pledged R1.5 billion to build South Africa’s first high-tech smartphone plant at the Dube Trade Port outside Durban and associated retail infrastructure. At the launch, the company said it had spent roughly half of that planned capital to set up the factory.
Besides its own cash injection, Mara Phones received working capital and trade finance from the state-owned Industrial Development Corporation (IDC) and from Standard Bank.
The South African government also offered buying support. In April last year, it recognised Mara Phones as its preferred phone brand in a transversal contract on communications due to run until 2026. That required all government entities and departments to buy Mara phones, unless they could show good reason to go with a different brand.
Mara did not respond to Business Insider’s questions. Standard Bank said it could not comment.
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