In this file picture are rhino horns seized by customs and excise in Hong Kong in November 2011. PICTURE: REUTERS

Tony Carnie

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THE unprecedented assault on South Africa’s rhinos may be part of a deliberate strategy by wealthy foreign speculators to drive rhinos to extinction so they can reap windfall profits from selling massive rhino horn stockpiles.

This is the surprising suggestion from a group of American and Dutch economists who compared the profitability of strategies to manipulate the supply of rhino horns to reap maximum financial returns.

Writing in a recent edition of the Oxford Review of Economic Policy, economists Charles Mason, Erwin Bulte and Richard Horan suggest that stockpiling rhino horns and other commodities from rare and endangered wildlife species has become an increasingly attractive proposition for unscrupulous financial speculators.

In their paper, “Banking on Extinction: Endangered Species and Speculation”, the researchers note that as wildlife commodities become increasingly rare the prices rise steadily, and once supplies run out, speculators who have hoarded rhino horns would enjoy a monopoly over prices.

South Africa’s Department of Environmental Affairs declined to comment officially on the suggestions made in the paper, although some conservation officials have previously expressed concern that stockpiling and speculation may be among factors driving the unprecedented spike in rhino poaching.

The economists who wrote the report have urged member nations of the Convention on International Trade in Endangered Species (Cites) to consider changing wildlife trading laws to close the loophole that allows wildlife traders to profit if a species becomes extinct.

Their paper, which focuses mainly on stockpiled black rhino horns, compares the relative financial returns from banking rhino horns over the long term with those of banking rhino horns and then dumping them in the market to manipulate commodity prices.

They conclude, from an economic perspective, that rhino horn speculators stand to make considerably higher profits if they wait patiently for rhinos to go extinct than if they hoard horns and dribble out limited supplies from time to time while there are animals alive in the wild.

While the cost of investing in horn and sitting on it indefinitely was high, it was “more than offset by the post-extinction profit flow”.

“Private parties, mainly in Asian countries, have stored large quantities of rhino horn over the past few decades,” the economists write.

“Presumably, these stocks are held in the expectation that prices will rise rapidly to compensate for the interest foregone (from not selling).

“In the recent past, speculators have been (proved) right. Rhino horn prices have increased tremendously since the mid-1970s and, according to one estimate, rhino horn now fetches $60 000 (R530 000) a kilogram in Asian markets. Such prices are more than enough to compensate for the lost interest, justifying the stockpiling of rhino horns.”

The economists also note that the wild population of black rhinos collapsed from between 65 000 and 100 000 in the 1970s to about 2 500 animals in the 1990s.

The black rhino population had since recovered to about 5 000, but criminal syndicates were once again driving the increasing slaughter of black and white rhinos.

The researchers suggest that Cites regulations that ban international rhino horn trading do not take proper account of economic perspectives and so create conditions ideal for stockpiling rare wildlife products.

Under the regulations, it is illegal to trade in threatened or endangered species – but it is legal to trade in species that have become extinct.

“Because trade in extinct species is legal, owners of large stockpiles may find it worthwhile to promote an extinction strategy so as to remove the trade ban.

“If so, Cites has inadvertently created the context in which extinction is promoted, rather than prevented.”

To remove this perverse incentive to “bank on extinction”, the economists suggest that Cites consider revising regulations to ban trade even after a species becomes extinct.