Mikes Chicken faces closure after 36 yrs
The property, plant and equipment were transferred to the Department of Rural Development and Land reform for an amount of R137 million.
POLOKWANE – After 36 years in operation, Mike’s Chicken – a household name in Polokwane and surrounds – faces possible closure.
Mike Nunes, one of the shareholders, explained how the business went from humble beginnings to one of the stalwarts in the local chicken industry.
“The business was started in 1981 and grew from 5 000 chicks a week, to 200 000 chicks a week in July last year. The business consists of two farms, property, plant and equipment that was specially built and developed to suit the operational requirements of the business. We became a market leader in the poultry business in Limpopo.”
Nunes explains how the business had expanded. “We also have a breeder farm and hatchery in Mokopane. In 2010 the industry took a dip as food prices escalated, and chicken imports forced our prices down, and the trading industry became tough.”
In July 2013 the property, plant and equipment were purchased by the state as part of a land reform transaction to enhance black economic empowerment in the agricultural sector.
The property, plant and equipment were transferred to the Department of Rural Development and Land reform for an amount of R137 million.
According to Kirk Twine, attorney of Mike’s Chicken, the transaction was structured in such a way that a BEE company was granted a 30-year lease of the property, plant and equipment in turn that this company would sublease to Mike’s Chicken (Pty) Ltd. This was conducted in July 2013.
“Due to massive increase in the price of feed and the import of low priced poultry products, the broiler income stream, that is two thirds of the entity’s income, the entity was under major pressure. During this period the entity negotiated with several state organs, including the Department of Rural Development and Land Reform, for financial assistance. Although financial assistance was promised to be forthcoming, such assistance never transpired, and the company made the decision to commence with business rescue proceedings.”
In July 2016, Mike’s Chicken went into business rescue and the practitioners immediately re initiated financing negotiations with the Department of Rural Development and Land Reform, as, due to a number of difficult decisions, the entity was in the process of retrenching 483 of its 600 employees.
“Short and long term financial assistance were requested but was not granted and the retrenchments were completed at the end of July 2016. The Business Rescue Practitioners restructured a new business which was down scaled”
“The amount of R1 million was needed for the creditors. In the case of liquidation, no one will receive anything. Government gave a lease agreement, but it was never signed and nothing was forthcoming. No one wants to invest in this business. Since we had no joy coming from the government, we wrote a letter of demand saying that nothing is forthcoming. We then brought an urgent application for the R25 million financial assistance that government promised the company.”
Twine explains that legal action has been instituted against the State President, the Minister of Rural Development and Land Reform and the Minister of Agriculture and Rural Development.
“The R25 million is needed to feed the chickens as well as to pay the employees. We will try our best since the state opposed the case. We expect a discussion from government.”
“This court application is for a declaratory order and that we are defending the matter. I cannot comment further because the matter is now sub judice,” explains departmental spokesperson, Nicholas Magada.
