SA’s first smartphone factory sold for scrap - Myles Illidge

Key topics

• SA's first smartphone factory shut down, equipment sold at a loss

• Mara Phones failed despite gov support, job promises unmet

• Workers faced poor conditions, unpaid wages, and legal issues

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By Myles Illidge

Described as once being a “beacon of African innovation”, South Africa’s first smartphone factory has been stripped and sold, with its machinery liquidated for a fraction of its value.

Opened in October 2019, the Mara Phones factory in KwaZulu-Natal was the result of a R1.5-billion investment by the manufacturer with support from the South African government.

The company, established to assemble high-quality devices at affordable prices for the South African public, unveiled two smartphones — the Mara X and Mara Z — at the opening.

The devices promised long-lasting batteries, high internal storage capacity, and compatibility with Android One, meaning they were guaranteed to receive Android updates for two years.

Regarding pricing, the company said the Mara X would cost R2,999, while the higher-specced Mara Z would cost R3,999.

The company also produced a lower-spec Mara S device, which was 3G-only, while the two higher-spec phones support 4G connectivity.

Mara claimed that KwaZulu-Natal plant could assemble 1.2 million smartphones for the domestic and regional market.

“Korea has Samsung, China has Huawei & Tecno, USA has Apple, and now Africa has Mara Phones!” said Mara Group founder and former Mara Phones CEO, Ashish J. Thakkar.

The company also revealed plans to launch physical experience stores across South Africa.

Mara Phones said its investment in South Africa had already created nearly 200 jobs by the factory’s opening, of which 60% were women and over 90% were skilled, unemployed youth.

“Mara Phones South Africa is expected to generate about 1,500 direct jobs over a period of six years and thousands of indirect jobs, which will contribute to the reduction in unemployment and enhance the transfer of high-tech knowledge in South Africa,” it said.

However, the factory wasn’t in operation long enough for this level of job creation to be realised.

The KwaZulu-Natal plant was put up for auction just over two years after it opened.

R1.5-billion down the drain

In February 2022, Mara Phones’ founders demanded the sale of the KwaZulu-Natal factory in an attempt to salvage what they could from the facility.

Auction documents revealed that the plant and its contents were being sold as a single unit.

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The auction lot included the plant, its manufacturing and testing equipment, smartphone components, and assembled devices sitting in storage.

“The line is in very good condition and could be reworked to make other electronic components,” the auctioneers said.

Thakkar described the company’s ambitious plan to launch a smartphone factory in South Africa as “untenable” due to the Covid-19 pandemic and lockdowns four months after its launch.

“Unfortunately, the lack of uptake in the South African domestic market, coupled with a shortfall in tender materialisation and lockdowns, has prompted this course of action,” Mara’s executives said.

“As in other countries, the pandemic really affected South Africa and our business as a result, too.”

The company didn’t comment on its plans for the Mara Phones Experience Store, which it opened in Pamonya Mall, Soweto, in November 2020.

Reports at the time indicated that the store’s employees were unaware that the factory was being shut down.

They could not offer customers repair services, did not know where their new stock would come from, or whether the store would stay open.

Its closure came despite Mara Phones receiving a R101.3-million tax break in February 2020 for qualifying as a so-called “Greenfield project”.

The company had also received the status of a preferred brand in the South African government’s RT15-2021 communications contract.

This forced various state institutions to give preference to Mara smartphones over rivals like Samsung and Huawei.

The South African plant’s performance was in stark contrast to the Mara Phones factory in Rwanda, which was still performing well after opening around the same time in October 2019.

Lunch breaks in toilets and no bras allowed

Shortly after the news of Mara Phones closing the KwaZulu-Natal factory, a former plant employee told MyBroadband about the poor working conditions they were subjected to in the facility.

The former staff member alleged that the company had no regard for human rights or fair labour practices.

They claimed that staff had last received wages for April 2021 and had not received any remuneration since.

“It has been ten months of hunger, poverty, and stress from our creditors,” they said.

“We have lost more assets due to non-payments, and no one seems to care.”

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Moreover, employees were unable to claim from the Unemployment Insurance Fund (UIF) as Mara Phones “refused” to provide retrenchment letters when the factory stopped operating.

“We can’t apply for any sort of government support, like the R350 [Covid-19 relief of distress] grants, because we are still registered as employed by Mara Phones,” the employee said.

They also claimed that Mara Phones had never paid an income tax deduction from employee salaries to the South African Revenue Service.

Regarding the factory’s working conditions, the staff member said they were frequently reminded that the company was doing them a favour by paying and feeding them as South Africans.

Work contracts stipulated a nine-hour work day with pay of R33 per hour. However, the staff member claimed that workers were only paid for eight hours of work per day.

Staff were only given 30 minutes each day as a lunch break.

The factory canteen reportedly only served vegetarian food, and staff weren’t allowed to bring their own meals with meat.

The worker described the food provided at the canteen as “low class”.

When staff managed to sneak in their own meals, they had to eat their lunches in the bathroom “whilst others would be relieving themselves”.

The employee said the provision of only vegetarian food, combined with religious imagery around the factory, made workers feel as though they were forced to adopt the directors’ culture.

The employee also claimed that female workers at the factory were banned from wearing bras, ostensibly to prevent security alarms from triggering due to their metal wires.

“A stunning reversal” of a promising turnaround plan

In March 2022, the Mara Phones management buyout team claimed that it had found an investor that could help save the South African factory and keep its staff employed.

Sylvester Taku, who had served as Mara Phones’ managing director in South Africa, revealed that a management buyout team under his lead had secured an investor to ensure the business was adequately capitalised.

“The fact that we have secured the partnership of a tier-one raw material supplier will significantly improve margins and provide us with the capability of always having a broad range of devices with the latest specifications,” he explained.

“We have the support of our channel partners and the support from the government in creating an enabling environment for locally manufactured smart devices.”

However, these plans hit a major roadblock.

In a recent statement, Taku revealed that the factory’s state-of-the-art machinery was sold off for a fraction of its value.

“While an electronics manufacturer has acquired the equipment, offering a faint glimmer of industrial hope, the broader damage has been done,” he said.

“A local factory with immense potential has been lost, along with livelihoods, credibility, and the hard-won aspirations of those who believed in African-made technology.”

Taku said that, just months after joining the buyout, Lebashe Investment Group suspended him for alleged misconduct.

“What followed was a steady erosion of that original vision,” he said.

Taku challenged his suspension by taking his case to the Commission for Conciliation, Mediation and Arbitration (CCMA) and the High Court.

“In both forums, he was completely vindicated. The rulings exposed the suspension as unsubstantiated, procedurally flawed, and devoid of credible evidence,” the statement reads.

This is confirmed in the High Court ruling and CCMA award documents, which MyBroadband has seen.

“This was never about misconduct,” Taku said.

“It was about differing values. I believed and still believe in the power of local innovation and production.”

However, he said Lebashe insisted that South African manufacturing was not viable.

MyBroadband contacted Lebashe for comment about Taku’s allegations, and it did not respond by publication.

This article was first published by MyBroadband and is republished with permission