Runaway Game Prices – An Economic Bubble With Major Conservation Risks?
July 2014, Volume 12-4

There has been a lot of press coverage recently about the investment potential of game animals, especially disease-free buffalo of East African origin, sable antelope, roan antelope and Livingstone’s eland. Articles like the one in the FM of 16 August 2013, where game industry participants are quoted as saying: “There will be market fluctuations and prices will go up and down, but the bubble will never burst.” and “The rise in prices is more than sustainable.” and “Annual returns on investment of 80% or more are feasible on top breeding animals.” place this industry fairly and squarely within the bubble definition.

Sir Isaac Newton’s quote: “What goes up must go down” has been in common use in the financial investment field for many years. It is equally applicable to any other investment where there have been price increases of the magnitude of the game industry’s. Like religion is based (taking a simplistic view) on the struggle between good and evil, markets operate against the background struggle of greed and fear. When greed is in the ascendancy, you have a bull market; when fear triumphs, you have a bear market. When high returns are stressed, stimulating greed, and risks are glossed over, reducing fear, you create an imbalance and thereby fertile ground for an economic bubble.

A later article in Moneyweb (9 October 2013): “Why do business heavyweights like Johann Rupert invest in buffalo?” goes even further by comparing returns on buffalo and sable antelope with the JSE ALSI and the DJIA. Statements like “Even those without the land, skills and knowledge can participate and follow in the footsteps of business giants like (Cyril) Ramaphosa and (Johann) Rupert and reap handsome benefits” are irresponsible and would, if they were made about financial instruments, attract the close attention of the Financial Services Board.

There is one immutable, inescapable fact of any investment – higher returns come at the price of commensurately higher risk. When people start talking about high returns on investment without mentioning risk at all or even worse, imply that there is low risk associated with a high-return investment, investors should be very, very cautious.

There have been very many bubbles in the past, from the Tulip Mania of 1636/7, through the South Sea bubble of 1771 and the massive Commodities bubbles of the 1970’s, the Tokyo asset price bubble of the late 1980’s, the Ostrich bubble in the US, South Africa and Namibia of the early 1990’s, and even the most recent sub-prime mortgage crisis in the US, brought about largely by the housing bubble.

All of these were characterized by investors using past financial performance to justify future performance without taking any heed of the intrinsic value of the underlying asset. All of these, and I mean every one of these, were only sustained by a continuous stream of new investors prepared to buy in. When these new investors dried up, prices collapsed.

There are many models used to explain why bubbles develop, including, inter alia, extrapolation (where excessive use is made of past performance to justify future performance); the greater fool theory (there is always a greater fool who will take the investment off you); and herd theory (which simply stresses the human behavioral tendency to follow other people’s actions, i.e. buy when other people are buying and sell when others are selling). Summarizing these however, bubbles develop as a consequence of the price at which assets trade being based purely on past financial performance and not on in-depth analysis of the intrinsic or fundamental value of the asset. Furthermore, all bubbles have these things in common: assets trade at levels much higher than their intrinsic or fundamental value, the early entrants make money, the late entrants lose money, and the transition from a steadily-increasing price environment to a steeply decreasing price environment is catastrophic.

Prices for “top quality genetics” i.e. animals with unusually long horns, may continue to rise for a while as this trade consists almost exclusively of transactions between a few, extremely wealthy individuals and, at least in financial market terms, would probably not be given particularly high marks for price integrity/transparency.

Furthermore, it is also a little bit disingenuous to present animals that are being bred for single traits or characteristics as being genetically superior. They are in the main being bred in small and protected enclosures, in close proximity and with daily exposure to humans, and will inevitably lose all sorts of necessary survival traits, making them genetically inferior, if anything. The less said about color-variations the better. At least, the animals with longer horns may, in the short term, attract trophy hunters. Color variants like golden Wildebeest and black Impala hold little interest for most hunters and pose a genetic risk for wild populations.

The other, and in my opinion, the most risky consequence of breeding for horn length lies in its potential conservation impact. The economic sustainability of game ranching (and thereby conservation outside the proclaimed game reserves of South Africa) depends to a material extent on the income derived from hunting. Trophy hunting, where mainly mature bulls, usually past their genetic prime, are hunted at prices substantially higher than those asked for other animals, in turn makes a disproportionate contribution to the hunting income of the average game ranch. If, for example, the major international hunting associations were to start questioning the authenticity/admissibility of trophies hunted in South Africa as being artificially manipulated for horn length, they will not differentiate between game ranches where animals exist naturally and those where horn lengths have been manipulated. All South African trophies will be suspect.

If one takes into consideration that privately-controlled game ranches comprise some 20.5 million hectares, with some 18 million animals on them, and Government-controlled protected areas consist of only 7.5 million hectares, with some 6 million animals, any development which has the potential of detrimentally affecting the income stream of such a large proportion of the total South African game conservation universe, is of immense significance.


Chris Niehaus is a former Investment Analyst, a previous Deputy Chairman of the Johannesburg Stock Exchange and ex-CEO of HSBC Investment Services (Africa) and HSBC Securities (Asia). He is currently CEO of the South African Hunters and Game Conservation Association, the largest hunting and game conservation association in South Africa.

Author: Chris Niehaus (reprinted with permission from SA Hunter’s Magazine March Issue 2014)