A Conceptual Analysis of Relational Contracts in Agribusiness Supply Chains: The Case of the Sugar Industry in Swaziland

Abstract

This study examines the nature of the relationship between cane growers and millers and how it affects cane growers' perceptions of the value added in the sugar supply chain. Drawing from relational exchange theory, the study utilised the perceptions of 124 smallholder cane growers in the Swaziland sugar industry. Factors measured in terms of a likert type scale were used to measure each relational construct within the miller-grower contract relationship. The unpacks the trust relationship between large agribusiness companies and smallholder out growers, and shows that relationships characterised by social factors like trust, commitment, and cooperation enhance mutual benefit and quality relationships between parties. This study found that farmers perceive an element of opportunistic behaviour and a lack of cooperation by millers and therefore have limited trust in the millers. Consequently it was also found that satisfaction by cane growers on their relationship with millers has a positive relationship with their level of trust, level of commitment, relative dependence, perception of opportunistic behaviour by millers and perceived cooperation between themselves and the millers. The results point to a number of aspects both growers and millers need to attend to which could contribute to improved relationship and in turn efficiency and returns in the sugar industry in Swaziland.