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Will rhino horn auction work?

Analysts and the public remain divided after govt. said it might auction off massive stockpiles of rhino horn.

Finfoot Lake Reserve owner Miles Lappeman inspects a dead rhino. Picture: Taurai Maduna/EWN.
Rhino Poaching,Rhino,rhino horn,Bruce Whitfield,The Money Show
Business Local

JOHANNESBURG – Both analysts and the public divided over government’s announcement that it is planning to auction off massive stockpiles of rhino horn.

Government on Wednesday said it was considering a once-off sale of over 16,000 kilograms (kg) of rhino horn it had in stockpiles.

More than 2,000kg is in private hands.

The move is aimed at reducing the incentive behind rhino poaching, which has become a major concern for the country.

Rhino populations in South Africa dwindled to around 20,000.

In a poll conducted on Eyewitness News Online, readers were asked if the country should auction off rhino horns.

Results at 7pm showed 52 percent of people were in favour, while 48 percent were opposed to the idea.

Independent economic consultant Keith Lockwood outlined the theory behind the plan.

But he was unable to say whether he fully agreed with it.

Essentially, the theory is if the market for rhino horn is flooded by auctioning off the country’s stockpiles, the price will drop and the incentive to poach will decrease.

Lockwood’s first concern was that the condition of the stockpiles was unknown, meaning the actual amount that might be available for sale could be a lot less than hoped. 

“Rhino horn deteriorates over time and can be infested with bugs, which might make some of it unsalable.”

He also noted that there are no legal provisions for trade in rhino horn, referencing the Convention on the International Trade of Endangered Species of Wild Fauna and Flora (Cites).

However, South Africa will host the next Cites conference in 2016 where the idea will be presented to all members.

This could lead to the development of such provisions.

Lockwood says another objection to going ahead is that we can’t be sure what would actually happen.

He said there was simply not enough information and there was “ignorance of market dynamics” in relation to rhino trade.

The economist said it was possible that flooding the market would in fact create a new, expanded market.

However, the main concern is one or two entities buying up the entire stockpile and then gaining control of the broader market. 

They could easily cause prices to rise sharply again by limiting supply, which would give the incentive back to poachers to sell on the black market.

Lockwood added, “We have to be careful about managing expectations. We’re not saying that the criminal syndicates would disappear entirely.”

This concern was reflected by Pierre Heistein, instructor of UCT’s Applied Economics course for GetSmarter, who explained the dynamics of supply and demand in terms of rhino horn.

“Even if we did regulate the supply, we would need constant supply. This wouldn’t happen.”

He said he was doubtful that the plan would work because it was impossible to maintain the necessary supply of rhino horn, while keeping down the price to ward off poachers.

For more of Heistein’s analysis listen to the accompanying audio.

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