A buyout team comprising of Mara Phones South Africa management has made a proposal to the company’s lenders to turn the company around rather than auctioning it off for parts.
This is according to a statement issued on Monday by Mara Phones South Africa managing director Sylvester Taku.
“The Management Buyout Team’s turnaround proposal is currently under consideration with the lenders, and we strongly believe that our proposition will herald a new era for our local smart devices manufacturer,” Taku said.
“Our intention is to re-start operations in Durban as soon as possible, with our valued and loyal staff and build a proudly South African smart devices company together, with local ownership and leadership at the helm, and a dedicated and skilled local workforce.”
The management buyout team’s statement follows media reports last week that Standard Bank and the Industrial Development Corporation (IDC) had put the Mara Phones assembly plant in Durban up for auction.
President Cyril Ramaphosa launched the facility in October 2019 with much fanfare, punting it as a state of the art facility that would help create thousands of jobs.
Mara Phones announced at the time that it had raised R1.5 billion in funding, including loans from the IDC and Standard Bank.
The company would use half of the money to set up the assembly plant, while the remainder would ensure its continued operation.
Mara said the facility could assemble 1.2 million smartphones for the domestic and regional market and already employed 200 workers at its opening.
At launch, the plant assembled affordable smartphone models such as the Mara X, Mara Z, and Mara S.
However, last week the IDC told BusinessInsider that less than a third of the money was raised ultimately — R429 million.
The IDC was the senior lender and approved R238 million in debt facilities, and it said the shareholders could not raise their full contribution.
It decided against injecting further debt funding into the business when it missed production targets after resuming operations when South Africa’s Covid-19 lockdown restrictions lifted.
The IDC and other lenders put the plant up for sale to recoup their investment.
According to Mara Phones Global, the factory failed due to a lack of uptake of its products, fewer government tenders for its devices than it had anticipated, and the impact of the Covid-19 lockdown.
Mara Phones Global CEO Chris Corsi and founder Ashish Thakkar said the ambitious plan to launch a facility in South Africa was “untenable” due to the pandemic and lockdowns that followed four months after opening.
Taku, who was promoted from Head of Growth to Managing Director on 1 January 2021, said that he established a team to solve the company’s financial woes in July 2021.
That was when Mara Phones South Africa’s shareholder failed to capitalise the business and pay its debts as they became due.
The team’s goal was to find a turnaround solution and ensure continuity through a management buyout.
“Since assuming our new roles, we have been working tirelessly to restructure and turnaround the company and have been co-operating with those most affected, including creditors and staff,” Taku stated.
“We are particularly conscious that, whilst all creditors are important, employees and small businesses have suffered immense personal hardship over many months,” he said.
The management buyout team promised to do their utmost to make the best possible restitution under the circumstances.
“In the opinion of the Management Buyout Team, the South African government, telcos, creditors, banks, and the independently owned and operated Mara Experience Store franchise as well as the wider industry in general, have extended the venture a great deal of patience and support, for which we are appreciative.”
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