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The rhino commodity market - how to turn big profits

                                                                         Buy low sell high

Wildlife in South Africa, except for that in private hands, belongs to the citizens. The government and provincial authorities are custodians on behalf of those citizens, and should ensure that wildlife is conserved for future generations. 

But how well are those authorities doing their job? Are private owners buying wildlife at auctions to make quick profits?

It is well known that neither the state nor the provinces are sufficiently supporting the national and regional parks to cover their conservation costs. To make ends meet, organizations like SANParks and Ezemvelo auction off “excess” wildlife to private owners. Profits are made – for example the most recent Ezemvelo auction netted over R8 million ($719,000). It is estimated that 75% of the income for Ezemvelo comes from game sales and most of the profit comes from auctioning rhinos. 

The sale of rhinos has an interesting history.  When the then Natal Parks Board began sales of rhinos to private owners, it was at a fixed price of about $900. During the same time, a trophy hunt could bring in as much as $15,000 – resulting in the inevitable trend that about 10% of rhinos sold were almost immediately trophy hunted.  

When the Parks Board turned to auctions instead of direct sales, the prices rose. Looking at prices from 1987 to 1991, rhinos were sold for an average of $15,163. The latest figures available, from 2010, show that during that year the average auction price was $30,464. 

But there are two very interesting trends. For example, in 1988 and in 2007, the auction price came within a few hundred dollars of the hunting price. The response by the private rhino owners was immediate. In 1988 the hunting price was an average of $15,351, but in 1989 it jumped to $34,990, an increase of 228% in one year. In 2007 the hunting price was an average of $32,000 but by 2008 it jumped to an average of $54,479, an increase of 170% in one year. The price increases had almost no effect on the number of hunters. 

Clearly, trophy hunting prices were not determined by any free market economy. Rather, the rhino owners agreed to raise the hunting cost by a process of price fixing whenever profits were threatened. Also, average auction prices remained remarkably static between 1989 (18,600) to 2006 ($20,710), perhaps an indication of pre-arranged bidding prices. The only time when auction prices fluctuated significantly was during the political transition 1993-1995, when average auction prices fell to $9,700. The number of trophy hunts during 1994 also rose by 169% over previous years, further reflecting market uncertainty. 

The second interesting trend concerns the number of rhinos auctioned versus the number hunted. From 2005-2010 the DEA recorded 1,380 rhinos sold on auction. During that same time the DEA revealed that 635 rhinos had been hunted. CITES export records tell a different story – during 2005-2010 CITES export records show that 458 horns (equal to 229 hunted rhinos) and 1,020 hunting trophies were exported for a total of 1,249 rhinos shot. This in itself is quite interesting. But it means that according to the DEA 46% of the number of rhinos auctioned were hunted, while the CITES export records show that as many as 90% were hunted. While it cannot be shown that these were the same rhinos bought on auction and then hunted shortly thereafter, it does strongly suggest that there could be a direct pipeline for wild rhinos to become hunted rhinos. The consistently maintained differences between auction and hunting prices ensure good and substantial profits.

Apart from the profits to be made by Ezemvelo and SANParks from selling wild rhinos to private owners, these organizations have indicated that the reason for the auctions is to increase the herds of this threatened species. In effect they say that the protected areas are at capacity for rhinos, and to conserve the species better, more land is required for rhinos – private land.

However, the data reveals that private owners are earning substantial profits from turning wild rhinos into cash cows. Indeed, one of the most important aspects determining the auction price fetched by a rhino is allegedly the size of the horn and whether it is a male that can be trophy hunted. 

It also shows how South Africa’s wildlife is being mined out of the nationally protected areas to be turned into profits for a small minority of citizens. The authorities have some explaining to do. 

Picture credit:

Main data source: Milliken, T. and Shaw, J. (2012). The South Africa – Viet Nam Rhino Horn Trade Nexus: A deadly combination of institutional lapses, corrupt wildlife industry professionals and Asian crime syndicates. TRAFFIC, Johannesburg, South Africa.

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Posted by Chris Macsween at 19:56

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