Improving the productivity and competitiveness of small-scale sugarcane contractors in KwaZulu-Natal.

Abstract

The productivity of small-scale sugarcane contractors affects not only their own profitability and sustainability, but that of other stakeholders as well, such as the small-scale sugarcane farmers they contract to and the sugar mills these farmers supply in the form of improved services to growers and a steady flow of sugarcane to mills. This study firstly illustrates the organisational structures of the sugar industry. It then aims to identify constraints that inhibit the performance (such as timely haulage operations and cost effectiveness) of small-scale sugarcane contractors in the small-scale sugar industry of KwaZulu-Natal (KZN). To obtain this information, interviews were conducted with 124 randomly selected contractors from 11 mill group areas in KZN between September 2002 and July 2003. Case studies (concerning institutional issues such as organisational structures) of contractors, sub-committee members, and development officers were also conducted in eight mill group areas of KZN between September 2002 and February 2004. Sample statistics and case study results show that contractors face institutional constraints (work allocation limitations, lack of performance incentives and high transaction costs, such as negotiation costs, the risk of losing work and contract default risk), cash flow problems, poor physical infrastructure and a lack of labour. It is concluded that the promotion of a more competitive small-scale sugarcane contractor sector will alleviate many of the problems (such as work allocation limitations) faced by small-scale contractors, while providing incentives for the provision of higher quality and cheaper services to small-scale sugarcane growers. The study also examines the attributes of small-scale sugarcane contractors that affect their quality of service as perceived by small-scale sugarcane growers (SSGs) within current institutions. Information is drawn from the same sample survey, although ten observations from the Umfolozi area are excluded because they were not part of the sample drawn from population lists. Further interviews were conducted in the same time period with SSGs for information on contractor service quality (transport and general service timeliness, meeting of daily ratable delivery requirements, low downtimes, good staff management, and minimal disagreements on service terms). Results show that factors affecting a contractor's perceived service quality include gender, training, the quality of information used (industry focused information sources such as the South African Sugar Association Experiment Station (SASEX) and the Ingede magazine, or general sources such as the radio), and sugarcane tonnage transported (size of business). Being a male contractor and having a larger business positively influence service rating as perceived by SSGs. The importance of the quality of information used and increased training levels highlights the need for the continual provision of relevant information and training for sugarcane contractors by extension services (government, SASEX and milling companies). The study also identifies the need for further research on the issue of contractor machinery costs. In a competitive sector contractors would need to have adequate information on own costs in order to compare these with contract rates in the market. Further guidance by extension staff and other industry advisors (e.g. development officers) in the accessing of adequate finance may also be necessary. Government has a role in strategising the creation of land markets to promote efficient use of resources (land), while providing improved rural infrastructure (mainly district roads). Government also needs to ensure unbiased tribal court rulings, review the impacts of minimum wage legislation on contractors sourcing labour, and provide protection for those competing for work.