Bernard Groenewald and Richard York – Golden Breeders
With the dust finally settling after a very successful congress and life returning back to normal, an immense sense of
pride and accomplishment has overcome us all in Wildlife Industry. Congratulations to Wildlife Ranching South Africa
(WRSA) on a fantastically run congress, an outstanding achievement. The wildlife industry exceeded itself yet again
and continues to grow in stature and strength. It was furthermore an exceptional privilege to be given an
opportunity to share our economic outlook with all present at the congress. After numerous requests from those
who had attended, this is a brief summation of the presentation.
Without doubt the single biggest question asked by new comers
and wildlife ranching sceptics is when is the bubble going to
burst? I’d like to finally answer this question once and for all and
allow all the doubting Thomas to relax. Game ranching has
evolved at such a pace and is continuing to develop and grow
itself as an industry, this is predominantly as a result of the great
passion and drive within us all who enjoy farming and enjoy the
great outdoors. Nothing gives me greater fulfilment or happiness
than to spend a time on my farm amongst all my animals. Game
Ranching gives me the opportunity to do my work and also take my children to work with me, providing me with
quality family time as well as living my passion. Yes, within our industry there will be market fluctuation and prices
will go up and down, but the bubble will never burst. Game farming is our passion and our dream, every South
African dreams about owning a small farm in the bushveld with frolicking antelope running on the open plains, we all
have an African dream and that dream is to own a game farm.
“Golden Breeders or its members will not be held liable for any investment decisions based on the figures provided, consult your financial advisor”
GAME FARMING IS OUR
PASSION!
Before we look at the sale statistics released by Vleissentraal
on their website, I’d like to remind you to question and
understand our calculations. Too often economic articles are
published and people don’t question the assumptions or
figures placed in front of them, blindly believing the view point
of the author. It is imperative that you not only question the
figures but also understand the numbers and the different
variables behind the statistics. Vleissentraals figures provide a good source of information, with actual sales records
for the last 10 years - not made up projections. These figures can also be easily accessed and are open to all in the
wildlife industry.
What most people seldom grasp is that the wildlife industry has not only
progressed economically, but has also revived the genetic quality of our wildlife,
something we had previously reduced as a result on uncensored hunting. The
cooperative work done between game ranchers, hunters and animal scientists are
slowly starting to rectify this and restoring the imbalance created. The
progression of Sable genetics is testament to this achievement and helps
demonstrate that as an increased quality of Sable is produced, so too the price increases. The high demand for
superior genetics will always ensure a premium for top breeders.
Due to the value we place on scarce game we have not only become the generation that has restored wildlife to the
land but have also become the generation that has enhanced and restored the genetic quality of our wildlife. It is
astonishing to see how positively the wildlife industry has grown, predominantly as a result of the legal trade, the
scarcity of wildlife and the hunting and tourism industry. Unlike Kenya who banned all hunting in 1977 and has
since lost 60-70% of its wildlife population, South Africa’s wildlife population continues to increase and thrive as a
result of wildlife having a sustainable economic value.
“Golden Breeders or its members will not be held liable for any investment decisions based on the figures provided, consult your financial advisor”
Due to economic value placed on our
wildlife, we have secured the future of our
wildlife heritage!
Table 1 provides a reflection of how sales within the wildlife industry have increased and what some of the main
underlying factors are behind this surge. The red towers represent total game sales of all species on Vleissentraal’s
auctions over the last 10 years and the blue tower indicates the percentage of sales of rare species that contributing
to the total sales. Rare species are represented by only seven species, which include; White Rhino, Livingston Eland,
Buffalo, Roan, Sable, Black Impala and Golden Wildebeest.
Just on Vleissentraal’s auctions alone the wildlife industry has grown from a R62million
industry to a R864million in the last ten years, with a total turnover of just under
R2.2Billion during this period.
Table 1 - Total Sales Figures on Vleissentraal Auctions 2003-2012
R 900
R 800
Millions
R 700
R 600
R 500
R 400
* All Species (including rare game species)
* Only Rare Game Species
R 300
R 200
R 100
R2003
2004
2005
2006
Total Sales
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
R62 029 000
R71 895 000
R48 495 000
R60 206 000
R89 544 000
R111 478 000
R221 844 000
R232 658 000
R434 048 000
R864 056 000
2007
2008
2009
Rare Species
R41 345 000
R37 848 000
R22 330 000
R36 526 000
R65 656 000
R88 176 000
R192 599 000
R209 206 000
R395 619 000
R788 908 000
2010
2011
2012
Plains Game
R20 684 000
R34 047 000
R26 165 000
R23 680 000
R23 888 000
R23 302 000
R29 245 000
R23 452 000
R38 429 000
R75 148 000
“Golden Breeders or its members will not be held liable for any investment decisions based on the figures provided, consult your financial advisor”
It is amazing to see how our industry has progressed into a Billion Rand industry in 2012. If we delve further into the
Vleissentraal figures for 2012 as illustrated in Table 2. The seven rare species contributed 91.30% of all turnover,
with Buffalo and Sable contributing the main majority of that figure with 77.14% of all turnover - an impressive
R667.40million. The biggest single paradigm shift in the market is that breeders are willing to pay for the best and
scarcest genetics available. The market has shifted its entire concept from being producers of quantity to producers
of quality. Golden Wildebeest and Black Impala made up the next biggest portion of the turnover with 10.47%
(R90.5Million). Most new breeders in the industry are breeding with colour variants. It is the first entry point into the
market. The capital investment required to start off a substantial breeding program is far less than that required to
purchase a Buffalo or Sable herd.
Plains game only accounts for 8.70% of turnover and this is partially because of the economic cost factors. Hunting
plays a pivotal role the wildlife industry. Hunting generates a far better income for the game rancher who uses
hunting as a management tool on his property to those who send their animals to auction. Through the use of
hunting the game rancher avoids capture, transport and commission costs. Regardless, the average price paid for
plains game was R7 648 per animal that is for all species ranging from an Impala to a Giraffe or Zebra. This on its own
is very promising.
Table 2 - Total Sales turnover on Vleissentraal Auctions 2012
Total number of animals sold in 2012 on Vleissentraal Auctions
Plains Game
9825
Roan
68
Livingstone Eland
164
White Rhino
41
Buffalo
384
Sable
829
Black Impala
159
Golden Wildebeest
106
“Golden Breeders or its members will not be held liable for any investment decisions based on the figures provided, consult your financial advisor”
If a holistic approach taken and we compare sales data for the last ten years we get a clear indication how scarce
rare species really are. Over the last ten years 108374 animal have been sold on Vleisentraal Auctions, of this the
seven rare species contribute only 8265 of the total animals sold or 7.63%, this is why they are referred to as rare
or scarce game. Colour variants such as Golden Wildebeest and Black Impala represent only 0.63% of all animals
sold over the last 10 year.
Table 3 - Total Animals Sold by Vleissentraal Auctions “2003-2012”
The tables and graphs below give a descriptive history of the average prices paid for scarce game on
Vleissentraals auctions over the last 10 years.
In the last ten years 540 Roan sold with a total turnover of R55.87 Million. The lowest price paid for breeding
groups was in 2006 when Roan sold for R73 784 and the highest price paid was R400 000 for top breeding females in
2012. 168 males were sold for an average price of between “R22 826 – R101 545”.
Did the bubble burst on Roans in 2005? No it didn’t, but Roan prices did experience market fluctuation as
demand decreased. Our industry will continue to experience market fluctuation and prices will go up or down
“Golden Breeders or its members will not be held liable for any investment decisions based on the figures provided, consult your financial advisor”
depending on a variety of factors such as quality, scarcity and demand but the value we place on our wildlife will
never disappear, so how can the bubble ever burst?
1773 disease free Buffalo have sold in the last ten years with a total turnover of R792.02Million. Buffalo prices have
increased dramatically as a result of breeders selecting purely on quality rather than quantity. While top quality
East-African Buffalo sell for amounts of over R1Million, small horned bulls and cows still sell for remarkably low
prices. Average prices have also increased as fewer poor quality buffalo are placed on the market as they are rather
sold direct to hunting outfitters.
Sable prices continue to increase; with over 3881 Sable producing R728.98Million in turnover and 3.58% of all
animals sold. The most recent surge in Sable is mainly as a result of the ‘50” Celebration’, when R12Million was paid
for a bull in 2012. Top bulls now have an increased value and are used to upgrade female and herd genetics,
producing a far greater return on investment for the game rancher.
451 Black Impala with a total turnover of R62.74Million have sold in the last ten years. This represents 0.42% of all
animals sold. In 2005-2007 Black Impala struggled as the market developed - the “bubble burst” with only 5 Black
Impala sold in 2005 and 2006 the market demand was non-existent. It was only once people started selling again did
the market responded as both demand and price increased. Hence why once again we can dispel the myth of the
bubble bursting, but we can expect market fluctuation.
“Golden Breeders or its members will not be held liable for any investment decisions based on the figures provided, consult your financial advisor”
Golden Wildebeest “a ladies buffalo” represent the smallest contribution with only 227 animals sold in the last 10
years (0.21%) whilst generating R101.65Million in turnover. In 2011 after nature conservation agreed to the legalised
trade and movement of colour variants their average price doubled, as breeders had a sense of security in the
market. Regardless that supply has increased Golden Wildebeest continue to hold a high average price as both male
and female wildebeest calves currently have a high value.
Table 4 provides a combined summation of the average price paid for rare game on auction over the last five years
with comparative data between the different species.
Table 4 – Average price paid for rare species on Vleissentraal Auctions 2008-2012
“Golden Breeders or its members will not be held liable for any investment decisions based on the figures provided, consult your financial advisor”
One of the main factors that have led to an average increase in wildlife prices on Vleissentraals auctions is that cull
animals no longer get placed on auctions, these include young Sable, Buffalo and Roan bulls which are generally sold
out of hand. In 2011 a 179 young Sable bulls sold for an average of R34 335 whereas in 2012 only 89 were sold on
Vleissentraal auctions for an average price of R27 213 per bull.
Weak females are also no longer sold, as the market has matured and can recognise the difference in quality
animals. A key example of this is “a Buffalo is no longer just a Buffalo”. The next growth curve in the industry will be
the same with all the colour variants, as the quantities available increase a premium price will be paid for top quality
breeding genetics. Currently breeders are not concerned about the quality of colour variants but rather the colour,
as more volour variants become available the perception will change and similar pricing structures such as Buffalo
and Sable will apply to colour variants. There is no need to re-invent the wheel, if we look at the sigmoid growth
curve and its projection we can see how the buffalo breeders achieve regenirated growth and increased the average
price for their animals. During the doubt and uncertainty phase of the Sigmoid growth curve they re-established
themselves as breeders and started selling phenominal Buffalo genetics on top buffalo auction. In 2012 Piet Warren
achieved precisly the same thing as the buffalo breeders. Similarly Golden Wildebeest breeders are no longer just
concerned about the colour but rather the quality of the animal, of which horn size is one of the important factors.
As demonstrated in adjoining graphic, the bell shape curve provides a general distribution of any given population.
Gone are the days that breeders can expect above average prices for below average quality animals. The market has
matured and now knows the difference between exceptional and standard quality animals. Buffalo and Sable have
already provide the way in showcasing the greater the quality of the animal we breed with the higher the economic
or Rand Value will be. It is therefore of paramount importance to breed with the best genetics available as quality
will always remain a sort after commodity in the wildlife industry.
“Golden Breeders or its members will not be held liable for any investment decisions based on the figures provided, consult your financial advisor”
So far we have only focused on the market fluctuation and sales figures within our industry and what has caused the
fluctuation within the market over the last ten years. Many breeders do all forms of calculations and equations to
determine their own economic projections for the wildlife industry. Below is a very simple and effective way how we
evaluate our investment and determine the return on capital employed. This layout is very effective and can be used
in multiple fields and industries.
The top column represents your initial
investment or introduction cost (capital outlay).
The middle section denotes your production
value. How many calves are born and what their
accumulative economic value is.
Production costs are subtracted from the
production value and generate a total return.
Finally your return on capital employed is
calculated by dividing the total return by your
introduction cost and multiplying it by 100 to
provide a percentage.
As Mark Twain says – “There are lies, damned lies, and statistics”. Therefore I would not only advise you to
question our calculations but also use our method and do your own predictions. Don’t just believe our figures;
calculate your own return on capital employed that is specific to your individual investment.
Please remember: “These calculations are our own basic calculations and percentages will differ
depending on your individual capital investment.”
Nyala
Provide such a fantastic return on invest because
they produce 3 lambs every 2 years.
Black Impala Ram and Foundation
ewes
Black Impala are the entry point into the seven rare
species market and are thus always in great demand
for new investors as they require the smallest
capital investment.
“Golden Breeders or its members will not be held liable for any investment decisions based on the figures provided, consult your financial advisor”
Golden Wildebeest Bull and
Foundation Cows
The next entry point is Golden Wildebeest as
Golden bulls and cow predominantly sell for higher
prices than Black Impala.
Golden Wildebeest bull, 3 Golden
Cows and 27 Split Cows
Please note the Split cows give 0% Golden calves,
the next two sheets will demonstrate an increase
return if you receive 10 and 20% Golden calves from
your Split cows.
Golden Wildebeest bull, 3 Golden
Cows and 27 Split Cows
If Split cows provide 10% Golden calves.
Golden Wildebeest bull, 3 Golden
Cows and 27 Split Cows
If Split cows provide 20% Golden calves.
“Golden Breeders or its members will not be held liable for any investment decisions based on the figures provided, consult your financial advisor”
Sable Bull and Cows
Sable are considered to be a more secure and safer
investment, however they provide a much lower
return, mainly because unlike colour variants that
both male and females have a value, only female
Sable carry the high value in the breeding circles.
So why was R12million paid for a Sable Bull?
Because the investment paid will up the value of the
young bulls from R25 000 to about R125 000, as well
as the value of the heifer. Thus increasing the return
on capital employed.
Golden Wildebeest bull, 6 Golden
Cows
With a pure Golden herd of a bull and six cows we
achieve a return of 46.03%. Slightly higher than
Sable because as mentioned both male and female
Golden wildebeest have a value.
Golden Wildebeest bull, 6 Golden
Cows and 24 Normal Blue Cows
Unlike Sable, Roan and Buffalo we can also add
normal wildebeest to the breeding project, as it
would be a considerable waste to only have six cows
with a bull.
If we add 24 normal cows to the herd, we receive an
increase of return on capital of just under 10%.
Normal plains game
All wildlife is actually very profitable as we receive a
dividend in the form of a calf or lamb every year. If
we take a standard plains game animal of R3000, we
receive a 45.16% return on capital employed. This is
a very high margin; however it requires much larger
farm and number of animals to be able profitable.
So don’t discard your plains game, if managed
correctly and extensively they too can also be very
profitable.
“Golden Breeders or its members will not be held liable for any investment decisions based on the figures provided, consult your financial advisor”
Properties
LBG Holdings has been involved in the property
market for a substantial amount of years now and
compares all financial investment to properties.
Here we have taken a flat as an example and
compared the return on capital employed.
We have a long way to go before properties become
a more lucrative investment option than game
farming. If we work the sum backwards to get 10%
Return on capital employed. The average value of
our calves born must be 13.89% of the total adult’s
value to be similar to properties.
As South African game ranchers we are privileged
to be able to generate a sustainable income from
our wildlife due to them having an economic
value. The advice we would give to breeders, is to
select species that provide the best return on
investment, by concentrating on the production
value of the species as well as the species that
gives you as a game rancher the greatest passion.
“Golden Breeders or its members will not be held liable for any investment decisions based on the figures provided, consult your financial advisor”