Former employees and service providers have accused Hlumelo Biko, the son of anti-apartheid activists Steve Biko and Mamphela Ramphele, of failing to honour salary and services payments for months since 2016.
Hlumelo Biko’s company, Circle Food Group (CFG), was reportedly evicted from a posh office in Sandton due to failure to honour R100 000 monthly payments after the landlord spent about R1 million meeting their specific requirements and taste.
Those close to the company and its service providers said CFG is also indebted to a company that designed and had already started building restaurants of a newly established brand in Johannesburg and Umtata in the Eastern Cape.
Sources said this company has been battling to get Hlumelo to pay them about R500 000 for almost eight months now and were forced to stop work.
“They have been offering him settlements and sending him lawyers’ letters and he would give them stories every time but never honoured his end of the bargain, causing everyone frustration,” said a source.
Two former employees said they were owed a combined amount of about R900 000 by CFG.
They said they have had several discussions with Hlumelo who “always made empty promises even when it was suggested he only pay 80% of what is owed to us”.
“I was employed by CFG mid-2016 and only got paid for one month and told at the end of the next that they won’t be able to pay me. I was really shocked ... I mean didn’t they know already weeks before that they won’t be able to pay me?” said one former employee.
“I was not paid for three months ... got paid in January and it all stopped there. An agreement was reached that we will be paid double salaries in the coming months until all the outstanding payments are covered but it never happened until I decided to resign.”
Former employees said the company sent out a communiqué towards the end of 2016 citing financial difficulties for delayed payments.
“All we were given were stories of how Hlumelo had just sold a property for R13 million so he can pay us but to this day, we’re still waiting. It is going to cost money but we’re readying ourselves to haul him before court to demand payment for work done for his company,” said a former employee.
Another ex-employee said financial challenges by CFG were the result of “poor leadership”, and that Hlumelo and those around him “failed to do business prospect correctly”.
“They counted chickens before they hatched and started hiring way too many people. The company was moved out of a R30 000 monthly rental office into a R250 000-a-month posh office in Cape Town and in the end, they could not afford everything,” she said.
Questions were sent to Hlumelo and CFG chief executive, Clive Rugara.
The latter responded without being specific to questions.
Rugara explained that CFG is a “start-up investment vehicle structured to invest in a specific set of opportunities in the South African food sector”.
He blamed all their problems on the company’s poor performance, saying “CFG made an anchor investment in February 2015 that performed below expectation and precipitated a situation where continued operations were no longer financially feasible.”
He said “over 70% of start-ups in South Africa fail in their first year and what happened at CFG was not uncommon”.
“We postponed disbanding the team for as long as possible and arrived at this conclusion only after immense consideration, multiple financial injections by shareholders and deliberations with partners, employees, suppliers and related external parties,” Rugara said.
Rugara said the “business suffered following a downturn in market conditions, dwindling sales in the core investment while overhead expenses grew disproportionately”, adding that the “risks associated with this start-up business were well known to all team members”.
Without acknowledging some people who were still owed, he said: “Most employees were paid for all of the time they were involved and all were paid at or above market.”