Like all asset bubbles this one too will pop. When, is an open question?
Two major game auctions took place during April. At the Erindi auction, there were many animals offered which can only be described as types or mutants for instance white springbuck, black springbuck, golden gemsbuck, and white blesbuck.
At the Outjo Game Festival, none of these more popular fashion game was on offer, but a pattern very similar to the Erindi auction, became noticeable for the rarer species.
Game, or at least certain types of it, has turned into an investment commodity. And looking at the industry’s development over two decades, it is clearly in a classic asset bubble.
Now I know the game farmers, or the new “game investors” do not like to hear this and I have been taken to task on more than one count of my views on overpriced game. But unfortunately, I have to point out the economic anomalies, and I have to make the fundamental calculations to determine the potential return on investment as far as expensive game goes.
I find that older game farmers do not fall into the investment trap so easily. Coming from many years of husbanding game, they know the industry and how fickle it is. They also realise that many species and types are typically fashion game, and what is in vogue now, may not be the flavour of the season in five years.
The other reality they recognise is that a trophy animal can only earn so much, and that there is stiff competition from many other African countries. And with game, there are only two users – trophy hunters and consumers of venison, and the latter does not demand a premium.
This means that all the johnny-come-lately game investors, do so to breed offspring which they then sell to other johnny-come-lately breeders, all hoping that the rare game will remain rare, or that the aberrant, mutant types, will remain in fashion. This is a rather serious investment risk to bet a half a million dollar investment on. The basic underlying principle is that game farmers only produce for other game farmers or game farming hopefuls. There is not an established consumer mechanism on the offtake side, and the price discovery mechanisms on the producer side are flimsy at best.
If I look at the pictures of the eager crowd at the Outjo Game Festival I only see a bunch of people keen to make an investment with the doubtful aim of making back that money, and eventually realising a profit on their investment. What I also see is a group of people, many of whom are still going to suffer serious losses on their game investments somewhere in the future. And the loss-making majority will be inspired and incentivised by the few individuals who happened to hit the market at just the right time with just the right animals.
Nobody in his right mind goes and pay N$340,000 for a roan. Although this is a beautiful animal, it is not a popular hunting trophy and the only reason why new investors are prepared to invest that amount of money in a single animal is because they harbour the expectation that they only need to sell one of its offspring next year, to redeem their investment. But they do not realise they can only sell to other breeders and at some point, the number of breeders will stabilise.
There is not a snowball’s hope that they will get their investment back from breeding animals either for trophies, or as suppliers of venison. Investing in game is similar to investing in expensive art – it only retains that value as long there exists a new buyer. It is a pyramid scheme in the making and the only people that score are those breeders who have been in the game before the prices went berserk.
My problems with vastly overpriced game is best illustrated by one specific species, the sable antelope. Thirty years ago, these were very rare in South Africa and speculative investment skyrocketed their prices to the obscene. Today, you can buy a whole breeding herd of sables for the same price a single animal cost then.
True, there are still very expensive sables, but then they are given an impressive label, as in Zambian sables or Angolan sables, or whatever. They are still sables and it is only the artificial label the seller attaches, that pushes up their price.
Another aspects of breeding very expensive game is that conservation and ecology get thrown out the back door. Imagine your tolerance for predation if a cheetah has his eyes on your ten thousand dollar black springbuck, or a leopard on your three hundred thousand dollar roan, then there is no question of how long the predator will survive. It has to go, usually dead.