Daybreak: A stain on South African business

The escalating fiasco with Daybreak Foods — in which its shoddy management led to the culling of 350,000 chickens — has shone an unflattering spotlight on the oversight exercised by the state-run Public Investment Corporation (PIC).

The story dates back to 2015, when the PIC financed the R1.2bn purchase of Afgri’s poultry division by a Black empowerment consortium led by Matome Maponya Investments. The PIC held 36% of the newly-renamed Daybreak, which became the country’s sixth-largest poultry producer. 

It was a disaster. Over the next few years, Daybreak plunged into the red and, in a serious indictment of a lazy or incompetent board, the company seemed more interested in targeting the whistleblowers who pointed out the corruption than in dealing with misspending.

The PIC overhauled the board, and took 100% control. But it seems to have made no difference. Daybreak has guzzled money as if it were a state-run company itself, rather than simply adjacent to one, leading to a situation where, in recent weeks, it simply left the chickens starving for days on end, until they eventually resorted to cannibalising each other. 

Nazareth Appalsamy, an inspector from the National Society for the Prevention of Cruelty to Animals (NSPCA), which was forced to send in 75 emergency staff to cull the 350,000 starving chickens, described this ordeal as “emotionally and physically taxing”.

“Many of the chickens that were still alive had such large holes in their bodies from being cannibalised by the other birds that you could see their internal organs,” he said. “It was clear the chickens were starved for a prolonged period.”

Worse, Appalsamy said when the NSPCA spoke to Daybreak’s management, they responded haughtily that there was nothing they could do about this. “Rather than taking accountability, Daybreak chose to wash its hands of the crisis,” he  said.

This is probably no surprise, given that Daybreak’s management — a term you would only want to use with significant caveats — has not hesitated to play the victim card. 

When asked to explain what happened, Daybreak spokesperson Nokwazi Ngcongo spoke of the company’s “significant financial constraints”, saying the company had made “numerous requests for funding” to the PIC, but was still waiting. This appears to subtly shift the blame for its mismanagement to the PIC — which, of course, isn’t the case.

Bizarrely, and despite all evidence to the contrary, Ngcongo said Daybreak “prioritises animal welfare”, while acknowledging “challenges” in this regard. This self-evidently insincere corporate speak talks to Daybreak’s detachment from a reality evident to anyone who saw any of the grisly pictures of chickens, listless and starving, or with gaping wounds. 

Good money after bad

Nonetheless, it seems the spin may have worked. On Friday night, the PIC said it would provide “immediate financial support” to Daybreak so it can pay salaries for April and buy feed to prevent “further starvation”. Yet it turns out that as much as Daybreak might whinge, it actually got R176m from the PIC in February, which it seems to have burnt through. 

The PIC has now given Daybreak another R74m. Given how badly its board has run the company, you would wonder whether the 1.2-million civil servants whose money this is would not consider this throwing good money after bad.

In its statement, the PIC stressed that Daybreak’s “board and management remains responsible and accountable for the company’s operations and finances”, but added that it will be “strengthening the board”. 

Not a moment too soon. The board and management have been so abysmal that you’d imagine this fiasco should do serious harm to their prospects of being hired anywhere else after this.

Of course, rogue companies with inept management aren’t uncommon; what makes this different is that Daybreak is effectively 100% owned by the state. The PIC, which does understand governance and has its own reputation on the line, should never have allowed it to get this far. 

If you’re wondering how bad the board has been, the Sunday Times reported yesterday that Daybreak’s chair, Bojane Segooa, immediately pushed for the payment of R1.2m in board fees this week once she heard the PIC was going to stump up funds. And, once she had got her R624,843 payment, she immediately quit.

The newspaper said Segooa was so desperate to get her hands on the money that she stripped CFO Aubrey Dali of his power to make payments, and instead gave it to Daybreak commercial finance manager Hluphi Moatshe, who promptly transferred the money. Dali, in response, also resigned.

Hopefully, this belated attempt to flee a sinking ship won’t prevent Segooa – still a lecturer of financial accounting at Unisa and once, incredibly, named one of News24’s “100 Young Mandelas of the Future”– from being held accountable for what happened.  

The NSPCA  has now laid criminal charges against the board under the Animals Protection Act. Segooa and the others should probably be pretty wary of the possible criminal conviction and one-year jail term, given how blatant this case is.

It’s a tragic end to a transaction hailed as a landmark Black empowerment deal in the agricultural sector in 2015. Which isn’t to say that companies shouldn’t fail; corporate collapse is the necessary trade-off which entitles executives to the massive payoffs when things go well. 

But to fail under these circumstances, where workers remain unpaid and 350,000 animals needlessly die under your Marie Antoinette oversight, while you as a board member are only looking to feather your own nest, does the reputation of the business sector no favours. If we demand accountability for crooked politicians, we have to do the same in the Daybreak case.