Can Economics 101 save the rhino?

Can Economics 101 save the rhino?

african rhino

Could South Africa meet the global rhino horn demand if the trade was legalised?

South Africa has officially made public it’s intention of using the next CITES meeting in 2016 to argue the case for controlled trade in rhino horn. They believe that a strictly controlled trade will help reduce poaching and provide much needed funds to further boost rhino conservation.

It may be possible for trade to reduce and effectively eliminate rhino poaching but South Africa is decades away from being in a position to use trade as a weapon against the poacher. An early entry into a legal trade would do far more harm to the rhino than doing nothing. 

Personally I’m not opposed ideologically to a trade in rhino horn if it is going to work. As a wildlife lover I want to able to go out on a safari and enjoy the majestic sight of a mature rhino with a full horn on display. If one way to keep that sight in the wild for generations to come is a thriving domesticated rhino industry then for me that is a price worth paying. How those domesticated rhino are cared for and looked after is an animal welfare and animal rights issue not a wildlife issue.

At the last meeting of CITES this year in Cambodia the South African Environmental Affairs Minister, Edna Molewa said, “The model that we have is based on pure law of supply and demand. Economics 101. Our rhinos are killed every day and the numbers are going up. The reality is that we have done all in our power and doing the same thing every day isn’t working. We do think that we need to address this issue of trade in a controlled manner so that we can at least begin to push down this pressure.”

I’m not too sure what situation Molewa was referring to when she said the model they had was based on supply and demand – basic Economics 101. Was she referring to the proposed trade model that South Africa wants to use to get rid of the poaching gangs or was she referring to the current poaching situation where the demand and profits are attracting poachers and criminal syndicates to target rhinos?

There’s no doubt that using economic theory and trading can push the poachers out of the rhino horn trade. And it’s pretty simple to do. All you need to do is ensure there is enough supply of rhino horn to reduce prices to such an extent that there is insufficient profit to attract the criminals. The problem is, if rhino horn trade was made legal would there be sufficient rhino to meet the demand.

At the last CITES meeting the pro-trade supporters were working at fringe meetings to gauge the feeling for the introduction of a controlled trade and to start the campaign to get a yes vote. One of the arguments they are using to support the rhino trade is the effectiveness of crocodile and alligator farming in nearly eliminating poaching of the reptiles. Back in the 60’s and 70’s the crocodile faced extinctions because of poaching. A system was set up for allowing legal trade through certified crocodile farms and ranches and pressure on wild  populations receded.

While farming of crocodiles and alligators have certainly worked in combating poaching, it can not be used as an example for the rhino horn market. Crocodiles are extremely fast breeders and it was possible to establish a sustainable supply of domesticated crocodiles to meet the market needs. In fact the difficulty in the crocodile and alligator skin market is not meeting the demand but keeping the supply of skins down to try and maintain the price levels.  There is currently a glut of skins on the market and in some places you can pick up crocodile skin wallets or handbags out of the bargain basket of some shops.

In 2009 in Louisiana alone alligator farmers were able to collect 500,000 eggs from the wild to incubate and hatch. I don’t know of any South African rhino farmer who has access to 500,000 rhino calves in the wild. The rhino and the crocodile are two entirely different beasts with totally different dynamics and reproductive abilities. You can add extra production capacity of crocodile farms very quickly by hatching more eggs which you just can not do with rhino who breed extremely slowly.

The rhino horn trade will be much more like the controlled trade in tiger skins of China. While there are thousands more tigers in captivity in tigers farms across China than there is in the wild, wild tigers are still poached. This is because the market is controlled and the price of a captive tiger skin is set at a higher price than the price of a poached wild tiger. The tiger farms of China have done nothing to remove poaching from the wild.

The tiger example highlights the importance of the price level at which the rhino horn trade is set. Currently rhino horn fetches about $70,000 per kg. As poachers on the ground get about $800 a kg there is a vast profit potential even after paying off officials with bribes and transportation costs. If South Africa was to set the price at $50,000 a kilo would this remove criminal syndicate from the trade – or would they just undercut the official price? How low would South Africa go in order to price out the poaching gangs?

International poaching gangs seem to be able to make profits in the raw ivory trade with prices averaging about $2000 a kilo. In order to price out the syndicates would rhino horn prices have to fall below $2000 a kilo – and would the South African government and rhino ranchers be prepared to let the price fall that much?

If the aim of a controlled trade in rhino horn is to eradicate poaching then that trade can not be a one-off auction, it has to be a sustainable long-term supply to meet market needs. A one-off auction may dent the profits of a crime syndicate for a year or so but it will not end the illegal trade.

Trying to determine the legal trade for rhino horn is not easy but needs to be done to determine if South Africa can meet the demand. It’s not just South Africa that will need to change their laws to allow for the legal trade in rhino horn. Most of the countries with the  current and past demand have laws to prevent the use of rhino horn. This means those countries will need to change their own laws to re-legalise the use of the horn. Re-legalising will release a greater demand for the product that will also need to be met.

While there may be the opportunity for South Africa to pick and choose who it trades with, would it work in practice? Would Yemen be happy to maintain their ban on trade in rhino horn which is used for ceremonial dagger handles if Taiwan is permitted to remove their domestic ban in order to trade with South Africa. If trade is permitted to be restarted then you have to assume the risk of it becoming a global trade and not a confined one between two or three countries.

Trying to estimate the potential global market for rhino horn, if it becomes legal again, is not easy. You have to work with outdated figures but you have to base your best ‘guesstimate’ on some sort of foundation.  Probably the most useful document to use in trying to guesstimate the potential demand for rhino horn is the 1992 report produced by TRAFFIC and the People’s Trust for Endangered Species. The report ‘The World Trade in Rhino Horn: A Review‘ (pdf download)  covers work undertaken by Parker and Martin in 1979 about the legal trade in rhino horn between 1949 and 1976. It also includes figures for the price of rhino horn during the same period.

In the table of rhino horn volumes the trade peaked in 1972 at 8,389kgs but this was a clear aberration on the normal levels so to try and get a more accurate average annual figure for between 1949 and 1976 I’ll discount the highest and lowest years in terms of value and run an average across the remaining years. This gives an annual rhino horn trade in volume of 1905 kg a year.

One of the most notable things about the figure is the absence of Vietnam as a named demand country. The present surge in poaching is driven by Vietnam. In 2007 a Vietnamese politician claimed that one of his relatives was cured from cancer by rhino horn and so the current crisis began. Vietnam probably accounts for 85% of the illegal trade in rhino horn.  If we assume that Vietnam will remain the majority market with 85% of the legal market than it’s possible to make a guesstimate of an annual global legal market for rhino horn at around the 13,000 kg mark.

Rhino horn supporters may say that in a controlled market they can decide who to sell rhino horn to and what price it is sold at. But that is not the crocodile model they keep using as an example as an successful trade in endangered species products. The only controls on where Thailand, for example, can sell their crocodile skins to are import controls by the United States etc. to prevent dumping of cheap skins into the market place which could affect their own alligator farmers. I don’t see proposals for dumping of huge quantities of rhino horn into the market-place over a prolonged period from the supporters of the rhino horn trade.

A controlled trade can not pick and choose who to sell the rhino horn too. The South African government may choose to only trade with Taiwan for example, but people in Vietnam are not going to shrug their shoulders and say ‘oh well, no rhino horn for me today.’ The trade has to be open and global for all countries to take part in or they will just look to crime syndicates to meet their demand and poaching will continue at current levels. This is why the Chinese tiger farm model is much closer to what will happen with a legal rhino horn trade than the crocodile example so loved of pro-trade supporters.

Can South Africa, even working in partnership with other southern Africa countries, meet a demand of 13,000 kg of rhino horn a year. Certainly not at present. There is estimated to be about 6,000 white rhino on private game reserves in Southern Africa – not even half of the 15,000 ‘domesticated’ rhino that would need to be harvested for horn each year to meet the 13,000 kg market demand (at a harvesting rate of 0.9kg per rhino each year). Unless the authorities are going to use wild-living rhino in national parks as a source of rhino horn then the 16,000 kg of stockpiled rhino horn will quickly be used up in just over a year. I’m not sure how happy safari tourists would be if every rhino they saw in the national parks had had it’s horn cut off.

 If South Africa were able to bring up their domestic rhino herds to 15,000 or more to meet potential demand that is only half of the solution. The pricing of the rhino horn needs to be at a level to drive the poaching gangs and crime syndicates out of the marketplace.

If the price is set too high then the poachers will just undercut the official price and continue in business – that’s what happens in tiger farming. Trying to set the price at a level that will deter poachers while still giving a return for the rhino ranchers would not be easy. The effective price will certainly be much lower than the current price for rhino horn. In order to price-out the gangs it’s likely that the price of rhino horn will need to drop below the price of black-market ivory which is about $2,000 kg. That’s not something I see in any of the plans or discussion I see from either the authorities or the rhino ranchers.

In the work by Parker and Martin in 1979 referred to above, the price in 1976  – at the end of legal rhino horn trading – the price was just $100 a kilo. Using UK inflation since 1976 (it’s the only historical data I have at hand to use in the calculation) that means at todays prices rhino horn was priced at $610 per kilo.

If the South Africans priced rhino horn at $610 per kilo and I can pretty much guarantee that poaching will effectively stop and the criminal gangs will move on to more profitable business. Somehow though I don’t see the price of rhino horn being set at the same level as it was when a legal market last existed.

 

External sites:

Mail and Guardian: SA pushes for legal trade in rhino horn

TRAFFIC

Peoples Trust for Endangered Species

 

 

One thought on “Can Economics 101 save the rhino?

  1. Rhinos are mammals, not reptiles like crocs and alligators. They are sentient beings and the thought of domesticating them is repugnant and unnecessary. Also, rhino horn cannot be easily harvested. The animal has to be pursued and darted with harsh, morphine-based drugs and the procedure is a dangerous and life-shortening one. When one adds to that the fact that rhino horn is a snake-oil product then it becomes very obvious what a ridiculous concept it is. Millions are being spent on demand-reduction campaigns. NO to rhino horn trade.

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