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. / Thesis (M.Sc.)-University of KwaZulu-Natal, Pietermaritzburg, 2004.

Private sector sugar millers and Ithala Development Finance Corporation (Ithala) implemented a graduated mortgage loan repayment scheme in the 1995/96 sugarcane production-season to try and improve access to farmland by aspirant commercial farmers in KwaZulu-Natal. By March 2001, the scheme had financed 106 "medium scale farmers" (MSFs), 99 of whom were still in the scheme (one loan had been repaid from own funds, and another six from the proceeds of life insurance policies). The first aim of this study was to analyse factors affecting whether or not the MSFs were current or in arrears on loan repayments as at 31 March 2001. A logit model based on full information for 83 MSFs shows that the estimated probability of a MSF being current on loan repayments was higher for clients with higher levels of average annual gross turnover relative to loan size, and for clients with access to substantive off-farm income. This suggests that farm size (proxied by annual farm gross turnover) does matter when policymakers in South Africa consider future similar schemes designed to improve access to commercial farmland by people that previously could not buy farmland. Smaller-sized, creditworthy farms with loan sizes that are relatively low compared to the expected average annual gross income may also be viable. Access to off-farm income could also be considered as a criterion in selecting potential farmers for future similar schemes, as it helps to provide additional liquidity to fund future operations and debt repayments, and can reduce leverage levels. The second aim was to conduct personal interviews with the 99 MSFs between July and September 2001 in order to identify what aspects of the scheme could be improved for new members . Responses from 88 of these MSFs show that 68% of them would opt to first rent land before purchasing, while 78% of them recognize, or have experienced, the cash flow problem associated with land purchase. Most of the MSFs felt that long-term sugarcane supply agreements constrain enterprise diversification, and that the quality of mentorship that they currently received was not satisfactory. Industry players could consider leveraging donor funding for empowerment projects to improve the quality of future mentorship programmes. There is also some scope for Ithala to improve the client-lender relationship by better clarifying the structure of the graduated repayments, sending loan statements on time, and helping clients to interpret loan statements. Growers perceive the need for a coordinator to monitor, and advise on how to improve, their financial performance this could be a new commercial service opportunity. Using an independent valuer to conduct farm valuations may also be necessary to avoid perceptions of bias in the value of farms offered for sale by the millers. A logit model of the MSFs' preferences for first renting land before purchase shows that new growers joining this scheme, or similar schemes for other farm products, with relatively less liquidity and less farming experience should be given the choice to rent land with an option to purchase. The preference for first renting by most of the surveyed MSFs could indicate that many very highly leveraged MSFs still experience cash flow stress despite the interest rate subsidy. A second policy implication, therefore, is that the current subsidy level, which reduces the effective starting interest rate level to about ten per cent relative to a typical five per cent current return on land, could be increased to promote access to farmland markets. Alternatively, loan terms in the next round of the scheme could be changed to require higher proportions of own equity (lower leverage levels), or to permit the deferral of principal payments, or to permit the purchase of smaller farms by creditworthy, part-time farmers. Another strategy to improve liquidity is to advise growers to limit family drawings in the early years after farmland purchase. / Thesis (M.Sc.Agric.)-University of Natal, Pietermaritzburg, 2003.