The effects of outsourcing on rural communities and business performance in the selected areas of the South African forestry industry.
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Date
2001
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Abstract
The objectives of the study were to examine the socio-economic impact of
outsourcing on forest-dependent communities, to evaluate the current outsourcing
management system in Mondi Forests, and to assess the financial impact (costs
savings) of outsourcing on Mondi Forests: Natal Region in KwaZulu-Natal.
Participatory Rural Appraisal exercises were used to assess the socio-economic
impact of outsourcing on forest-dependent communities. A questionnaire was then
used on a sample of Mondi Forests personnel to evaluate the current outsourcing
management system in Mondi Forests. Finally, cash-flow trends were used to
assess the financial impact (costs savings) of outsourcing on Mondi Forests, Natal
Region. Activities that have been outsourced include transport, harvesting
operations, silviculture operations, security services, mechanical services, training,
payroll services and information systems.
Results show that outsourcing has impacted negatively on the livelihoods of some of
the forest-dependent communities sampled. The negative impacts are mainly
associated with a reduction in hygiene services offered to these communities and
an increase in unemployment in some of these villages. Forest-dependent
communities perceive outsourcing as the cause of poor relationship between the
rural communities, forest companies and contractors as well as being the cause of
high unemployment rates.
Mondi Forests' personnel perceive that outsourcing goes beyond costs savings to
include redirecting scarce resources toward core business activities. Lower
morale and insecurity among forest staff members and negative views of the
forestry companies by rural communities, unions and government departments
were perceived as the disadvantages of outsourcing. Uncertainty with regards to
employment continuity and social problems (e.g. increased forest fires, poor relationship with local communities) were perceived as outsourcing risks. Results
show that Mondi Forests has implemented a number of strategies in order to
reduce some of these risks and disadvantages by giving preference to their ex-employees
when offering contracts, by providing start-up capital to emerging black
contractors, and by initiating community development programmes in order to
uplift the standard of living of the forest-dependent communities.
Mondi Forests' personnel suggested that forest management. accounting,
conservation management, and human resources are the best candidates for future
outsourcing, since most other forest organizations in the world are already
outsourcing them successfully. Most of these activities are still kept in-house in
Mondi Forests.
Results also show that outsourcing can be used with other rationalization methods to
save costs. This is because costs savings in Mondi Forests: Natal Region, since
1998 to 2001 were .not only due to outsourcing, but also to some other management
decisions such as reduced fertilizer and pesticides use. The total costs savings
were R14.5 million from 1998 to 2001.
Results support the need to strengthen the current rural development programmes
in Mondi Forests, and to the establish Community Liaison Forums to improve
communication with rural communities and to start community development
programmes. A contractor upliftment programme was also recommended for
developing the emerging black contractors. Lastly, company/contractor
agreements must be reviewed in order to ensure that social responsibility aspects
are appropriately managed. Outsourcing relationships need to consider the
economic, environmental and social effects in order to be sustainable.
Description
Thesis (M.Env.Dev.)-University of Natal, Pietermaritzburg, 2001.
Keywords
Forestry and community., Forest management--South Africa., Forests and forestry--Research., Forests and forestry--Economic aspects--South Africa., Theses--Environmental science.