Is it possible to decrease rhino poaching by trading more rhino horns? This is the question being debated by South African wildlife management and the answer lies in how the economics will respond to a change in legislation.
It is expected that about 600 rhinos will be killed in South Africa this year by poachers in pursuit of horns destined for sale on the black market.
Rhino horn is mostly demanded as a powder for use in traditional medicines and its value is derived from its mythical reputation as a cure for everything from fever to cancer. It is also in demand as an exclusive material for use in dagger handles and jewellery, or stored as a collector’s item.
Rhino horn fetches about $65 000 (R500 000) a kilogram, or approximately $400 000 a rhino, making poaching a highly profitable business if you can evade the law. The problem is that while poachers have a $400 000 incentive to kill a rhino, conservation management or private game farm owners do not have a $400 000 incentive to save one and the funds available for effective policing are severely limited in relation to those behind poaching operations. The tables are tipped and while the demand for rhino horn and its relative price continue to rise new strategies will be needed in the fight to save the rhino from complete extinction.
One of the proposed strategies under investigation is the option of legalising international trade in rhino horn and supporting this by actively farming rhinos in order to harvest their horns. If done under controlled conditions a rhino’s horn can be removed without any harm to the animal and over time they do grow back. In this way a legal, registered, and taxable industry is created in order to meet the international demand for rhino horn.
The theory is that this will decrease the price of rhino horn and remove the incentive for illegal poaching. The decrease in price would arise from two complementary forces in the market: first, an increase in supply would make the product more available and therefore stimulate price competition, and second, a decrease in demand would follow as it loses its status as a luxury or rare good. From a conservation point of view not only would the legal sale of rhino horn provide a much-needed source of funding for both governments and private parks, but it would also add a financial incentive for investing in more advanced counter-poaching security.
The problem with the argument in favour of legalisation is that it rests entirely on the assumption that legalised supply would be able to meet the full demand for rhino horn and essentially replace the current illegal supply.
Very little is known about the exact size of demand and it is being investigated whether this is a realistic ambition.
If trade was legalised, and the legal supply was not able to meet the international demand, it would have the catastrophic result of simply making illegal trade easier to execute and harder to track as it filled the gap in the market.
Another economic dynamic at play is that for anyone holding rhino horn as an investment, there is a strong financial incentive that rhinos do become extinct so that new supply ceases and prices sky-rocket.
If the illegal trade in rhino horn can be fully replaced by a legal market it can only benefit the survival of the species. But decisions must be thoroughly informed as any mistake will guarantee the rhino’s extinction.
Pierre Heistein is the convener of UCT’s Applied Economics for Smart Decision Making course. Visit www.getsmarter.co.za.