Major South African food producer enters business rescue

Daybreak Foods, a major poultry producer in South Africa, has entered business rescue due to significant financial difficulties.

On 20 May, South Africa’s Public Investment Corporation (PIC) backed a move to place Daybreak Foods, a major poultry producer, into business rescue to avoid liquidation and protect around 3,000 jobs. 

The PIC confirmed that a business rescue practitioner will now be appointed to evaluate the disruption to operations and help develop a credible turnaround strategy, working closely with Daybreak’s board of directors.

The decision to pursue business rescue followed a failed attempt to secure urgent funding to avert collapse last week. 

On 16 May, the PIC was unable to obtain R500 million in emergency funding needed to settle growing creditor claims. 

These included a pending liquidation application brought by three creditors, including Lakat Chicken, which had already secured a provisional liquidation order. 

Legal counsel reportedly advised the PIC that it stood little chance of successfully opposing the application and warned that resistance would be futile.

In the letter requesting funding, PIC chief investment officer Kabelo Rikhotso argued that the funds would “decisively alter” Daybreak’s worsening financial outlook. 

But by the end of that Friday, no approval had been granted, leaving business rescue as the only viable option. 

To stabilise the business in the short term, the PIC has since injected R74 million in working capital to address Daybreak’s immediate liquidity crunch.

Daybreak Foods was acquired by the PIC in 2015 for R1.19 billion. The ownership was divided evenly among three government entities.

These entities were the Government Employees Pension Fund, the Compensation Fund, and the Unemployment Insurance Fund. 

The investment was initially aligned with the PIC’s mandate to promote socio-economic development through strategic investments that encourage black ownership in agriculture, improve food security, and create jobs, particularly in rural areas.

The writing was on the wall

The Daybreak’s troubles began to surface early. By 2017, a CEO seconded by the PIC declared the business “technically insolvent” and questioned whether the PIC had overpaid for the asset. 

Despite these warnings, the PIC continued to provide financial support even as the company faced chronic mismanagement, internal board conflicts, and weak oversight.

In 2023, newly appointed CEO Richard Manzini introduced a turnaround strategy designed to restore stability. 

The PIC backed this with a R250 million funding facility to upgrade infrastructure and improve financial controls. 

However, by early 2025, only R176 million of the facility had been allocated, which proved insufficient and too late to stem the decline. 

The crisis worsened as Manzini and several executives resigned, citing governance failures. By April, Daybreak could no longer pay salaries, feed supplies stopped, and thousands of chickens died from starvation.

Despite the collapse in operations, the PIC remains committed to trying to rescue the business. 

It has now deployed what it describes as a high-powered team to lead the recovery process and steer Daybreak onto a sustainable growth path. 

The PIC noted that the success of the business rescue process will be critical not only for the company’s survival but also for preserving thousands of jobs and upholding the developmental objectives behind the initial investment.