End of the road for one of South Africa’s most important food producers
The Public Investment Corporation (PIC) is seeking a buyer for Daybreak Foods, its wholly owned chicken business in South Africa, which has been plagued by scandals and a business rescue process.
The PIC, which manages R3.7 trillion in South African state-worker pension funds, plans to sell “more then 60%” of the company, Chairman David Masondo said in reply to questions.
“We’ve got to exit it because we became a 100% shareholder by default,” he said earlier on Bloomberg Television. “We need to get an operational, strategic equity partner that will invest in the asset.”
The PIC has invested R1.7 billion over the past decade and placed the business in business rescue in June last year.
Allegations of mismanagement, financial distress, regulatory issues and incidents of animal cruelty have dogged the company, with Masondo saying the company has seen operational and financial improvements during the business-rescue process.
Daybreak still supplies about 6% of the chicken market in South Africa, with the continent’s biggest economy producing close to 1.7 million tons of protein a year.
The country is home to some of the largest chicken-producing companies in the region, including Astral Foods, of which the PIC also owns 24%, and Rainbow Chicken, majority-owned by South African billionaire Johann Rupert’s Remgro.
Daybreak forms part of the PIC’s unlisted portfolio business worth about R127 billion. “There are distressed assets, and we will have to get some specialists to work with the PIC in order to turn around those assets,” said Masondo.
By Jennifer Zabasajja and Loni Prinsloo, Bloomberg
The PIC had high hopes for Daybreak
Daybreak Foods is a South African poultry producer operating across Gauteng, Mpumalanga, Limpopo, and KwaZulu-Natal.
Established in 2001, the company grew to become one of the country’s largest poultry producers, supplying fresh and frozen chicken products.
The company was originally part of Afgri, a major agricultural services group. It was an established player in South Africa’s poultry industry.
Its operations included the entire poultry value chain, from breeding and hatcheries to broiler farming, feed milling, and chicken processing.
This allowed the company to deliver fresh frozen chicken products to the local market, employing over 3,400 South Africans.
At peak capacity, the business could produce approximately nine million birds per cycle of 34 days, making it one of the largest poultry producers in the country.
The PIC acquired Daybreak Foods for R1.19 billion in 2015. At the time, the PIC noted the acquisition aligned with its mandate to support socio-economic development and transformation through strategic investments.
The acquisition aimed to increase black ownership and participation in the agricultural sector, enhance food security, and contribute to job creation, especially in rural areas.
PIC said the investment would advance transformation in the agriculture industry, one of the least transformed sectors in the country.
At the time of the acquisition, Daybreak Foods was positioned as a strong, operationally sound business with solid market demand.
The PIC expected the company to deliver financial returns and developmental impact through sustainable agribusiness growth, empowerment, and rural economic upliftment.
These ambitions framed the rationale for the acquisition, before any signs of the financial and governance troubles that would follow in later years.
Additional reporting by BusinessTech
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