Institutional and resource constraints that inhibit contractor performance in the small-scale sugarcane industry in KwaZulu-Natal

Abstract

This study focuses on identifying constraints that inhibit sugarcane contractor performance in the small-scale sugar industry in KwaZulu-Natal (KZN). Information is drawn from a sample survey, conducted with 124 randomly selected contractors from 11 mill group areas of KZN between September 2002 and July 2003 and case studies of contractors, sub-committee members and development officers conducted in eight mill group areas. 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 a loss in work and contract default risk), cash flow problems, poor physical infrastructure and a lack of labour. It is expected that the promotion of a more competitive small-scale sugarcane contractor sector will alleviate many problems (such as work allocation limitations) faced by small-scale contractors, while providing incentives for their provision of higher quality and cheaper services to small-scale sugarcane growers (SSGs). Government also has a role in strategising the creation of land markets while providing improved rural infrastructure (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.

Keywords: institutions; small-scale contractor performance; sugar industry

South African Journal of Agricultural Extension Vol. 34(1) 2005: 55-80