PIC scrambles for cash as Daybreak creditors close in

The Public Investment Corporation (PIC) is engaged in a desperate last-minute cash scramble to prevent its embattled chicken producer, Daybreak Foods, going into liquidation.

It is understood a request for R500m in funding from clients the Unemployment Insurance Fund (UIF) and the Compensation Fund (CF) — needed by Friday to avert the finalisation of a liquidation application before the high court in Pretoria — was not successful.

The PIC has appointed a “new board” in a bid to save the dying company. In a letter requesting the funding, seen by the Sunday Times this week, the PIC said that since the last request for cash on May 12, three Daybreak creditors — including Lakat Chicken — had brought an urgent liquidation application, which was set down to be heard on Tuesday.

“[The] PIC was advised on May 14 that Lakat Chicken was provided a provisional order, pending finalisation of the process on the return date,” according to the letter, written by PIC chief investment officer Kabelo Rikhotso.

“The applicants seek a final winding-up order based on an alleged debt of R19 866 678.00 (excluding costs). We have been advised by our legal counsel that the pleadings suggest that there is limited to no prospects of successfully opposing liquidation, and any further opposition will prove unimpactful.”

It continued: “The PIC requests the approval of the requested R500m facility to assist in settling creditor claims, including the current liquidation claims.”

It said release of the funding would “decisively alter” Daybreak’s financial position.

Unconfirmed reports are that by close of business on Friday the request for further funding had not been met, with funders seemingly not convinced that advancing more cash would be prudent.

The company has received R250m from the Government Employees Pension Fund — the PIC’s largest funder, with R2-trillion of its money managed there.

This latest development puts about 3,400 workers' jobs on the line. This figure includes farmworkers and contract growers.

“Engagements with PIC clients, the Daybreak board and other stakeholders continue, and further outcomes will be communicated when approved,” the PIC said in response to a media enquiry yesterday.

“For the PIC and its clients, the investment case for Daybreak is informed by the fact that, if the company is properly managed, it has and can continue to generate cash-positive revenues.

“[Daybreak] provides crucial employment opportunities in rural and peri-rural towns in Mpumalanga and Limpopo, and its production output is a major contributor to the poultry industry and food security in the country,” the PIC said.

Last week, the Sunday Times reported on Daybreak’s dire financial situation, which saw workers’ April salaries unpaid and thousands of chickens dying at its facilities. This while former chair Bojane Segooa instructed that a substantial portion of the R2m cash left be used to pay her and another board members’ fees. She resigned shortly after the payment was made, citing safety concerns after she began receiving threats over investigations her board was undertaking into financial mismanagement at Daybreak.

At the heart of the problems plaguing the chicken producer — which once held about 7% of the chicken market in South Africa — are years of looting, malfeasance and broken governance at the top of the company. Its 100% owner, the PIC, has failed to effectively intervene over many years.

The PIC first became involved with Daybreak in 2015, when it funded businessman Kgolofelo Maponya R1.2bn in a broad-based BEE deal. At the time, the company took a 36% stake, while Maponya’s consortium took 54%, leaving Daybreak staff with 10%.

Then-CEO Maponya was driven out, and his shares taken over by the PIC after Daybreak sustained losses, despite loans to the value of R1bn. Former UIF commissioner Boas Seruwe was appointed as CEO in December 2016.

Under Seruwe, the company started a turnaround that led to more than R800m in profits between 2018 and 2021 — before he and his executives were removed by the company’s board. The Sunday Times understands the business was left with about R600m in cash at this time.

The executives, including Seruwe, challenged their dismissals at the Commission for Conciliation, Mediation and Arbitration (CCMA) and won their case, but were paid to leave instead of returning to their jobs.

The Sunday Times has determined that the PIC-appointed board that ousted Seruwe and his team had been improperly appointed, with the help of senior officials at the PIC. According to internal Daybreak reports, during the two years of their tenure — before the PIC had to go to court to remove them — Daybreak lost R200m to “various inflated one-off costs” and “unrelated activities”.

On Friday, after Bojane’s exit, Daybreak informed staff that the PIC had approved five new non-executive directors to join its board, alongside interim chair Charlotte Nkuna, Kgampi Bapela, Esethu Dazana and Kameshni Naidoo.

The new appointees are Andrew Makenete, who will be interim deputy chair, Tshokolo Nchocho, and PIC employees Brian Mavuka, Thabiso Moshikare and Tinus de Jonge, who acted as Daybreak CEO in 2016.

The appointments seem to have left the PIC’s clients underwhelmed, with one senior official, who is not authorised to speak to the media, saying the PIC component comprised people who had been “problematic” in the past.

“When you announce a board in this context, the expectation is that they will be people who can clean this thing up and revive it,” the official said. “How do we agree to your request for funds when you bring people who have been problematic in the past?”

Moshikare, the PIC’s acting head for unlisted investments, was part of the board that ousted Seruwe, and was rewarded with a promotion by the PIC. He also served on Daybreak’s board from about 2015 until 2019, when he resigned.

A source with close knowledge of Daybreak’s situation, who declined to be named, said Moshikare’s return to the board, as well as the appointment of Mavuka, suggested the PIC was not serious about putting the company back on a path to recovery.

“It is baffling that the PIC wants its request to be entertained seriously when it appoints the same person it effectively wanted out of that board recently back to the same board”.

Mavuka, who acted as PIC CFO between 2021 and 2024, is also not without scandal, having authorised a payment of R4.3bn to Ayo Technologies — in an ill-fated transaction that lost the PIC about R2.5bn — despite an instruction not to do so.

He too was rewarded with the acting CFO position, which came with a R6.9m annual salary.