According to an article published in the Financial Mail of August 2013, it is clear that top South African businessmen and breeders are optimistic about the game industry.
The stakes are high. Annual returns on investment of 80% or more are feasible from top breeding animals, even assuming prices remain unchanged, says Norman Adami, SA Breweries executive chairman, game farmer and WRSA marketing director.
Game breeder Bernard Groenewald sums up the sector’s optimism. ”There will be market fluctuations and prices will go up and down, but the bubble will never burst,” says Groenewald. “The high demand for superior genetics will always ensure a premium for top breeders.” Adami adds: “Top-quality genetics command a high premium.”
“The rise in prices is more than sustainable,” says Jacques Malan, a game farmer and former WRSA president. Malan holds the record for the highest price yet obtained by a breeder in 2012: R26m for Horison, a buffalo bull, and smashed the previous record for a buffalo bull of R18m, set in 2011. “They should make their money back [on Horison] in three years,” says Gert Dry, a former WRSA president. In 2014 a buffalo bull (Mystery) was sold for R40 million.
Adami believes the focus on breeding the best specimens places SA in a powerful position in the global ecotourism market. “A growing middle class in the developed world and especially in developing markets will continue to create a growing demand for wildlife experiences,” says Adami.
On colour variants:
“Colour variants are not freaks and are not bred through genetic engineering,” says Adami. “White lion, for example, are found in the wild.” Adami also believes if colour variants were to mingle with normal coloured game of the same species there would be no impact. This, he says, is because the gene producing colour variants is a recessive gene.
Malan is equally in favour of colour variants. “We are not creating something new,” says Malan. “In the old days [colour variants] had no value and were shot out. This is why no-one has heard of them.”
Venison production also holds great empowerment potential. “There is 12 million ha of overgrazed communal land that can be used for sustainable game farming,” says Adami. Used productively, the land could support a big meat processing industry owned and run by rural communities, he adds.
“The game industry’s vision is totally aligned with government’s growth strategy,” says Adami. “There is no reason it cannot grow from being a R10bn/year industry into a R100bn/year industry.”
Source: Financial Mail August 2013
Frequently asked questions:
Is the bubble going to burst?
There is no bubble. Unlike the credit bubble, the game industry until now has been funded with cash. There is no or little underlying debt as with the credit crash of 2008 (sub-prime crisis in the US and subsequent roll-over to the rest of the word), during which properties were bonded in excess of their value. The IT bubble of the 2000’s burst when IT companies with no underlying liquid assets were traded at high value. The game industry is debt-free with minimal lending, and gearing is by no means a factor, as farmers cannot bond an individual animal through their bank to buy another animal. It’s important to remember that animals provide an annual dividend in the form of a lamb or a calf to their owners and ROI is achieved on the initial animal and then on its offspring. Apart from this, there are various demand drivers that ensure the sustainable growth of the game industry such as growing tourism, hunting, scarcity, DNA and consumption. We foresee a stabilisation of prices over the next 10 to 15 years.
How are my animals identified?
All animals in our breeding system are tagged and microchipped for identification. DNA is also sampled from all animals under our control and kept in safe storage to positively identify offspring and prove their lineage.
There is a rumour that top breeders buy from one another to manipulate prices. Is this true?
Top breeders do not buy from one another to manipulate prices. They do so to increase and improve the genetic diversity of their animals. Game breeders will only purchase new stock at a price that will enhance their business strategy.
What happens if the government tries to stop the public from owning game?
Fortunately the ownership of game was enshrined in law many years ago. To make a change like that would involve challenging and changing the constitution and writing new laws. Keep in mind that wildlife owned by government in national parks represents a mere 20% of the total game population in South Africa. Private game ranchers and private reserves own the balance of land, which represents about 16,8% of South Africa’s total land mass. Government does not have the know-how, skills or expertise (and needs private sector participation) to conserve and protect SA’s wildlife.
Who is Gamevest’s auditor?
Gamevest is audited by Mazars South Africa, an international, integrated and independent organisation specialising in audit, accountancy, tax, legal and advisory services. Mazars draws on the skills of 14,000 professionals in the 73 countries in which it is represented.
Do I have access to Gamevest’s financials?
Yes, any client who is seriously considering purchasing animals from us will have access to our financial statements for inspection at our regional and/or head office.
May I visit and view the game I acquire?
Yes, any game owner may visit the game ranch to view their animals. We require two weeks’ written notice and management approval for such visits. No request will be withheld unreasonably. Game owners may utilise the lodge facilities at a discounted rate.
Given supply and demand – is the industry sustainable?
The current demand outstrips supply by far and due to various factors in the industry driving demand even higher, we believe that the industry will show strong growth for the next 10 to 15 years. Growing demand from game breeders, tourism, hunting, food security and the replenishment of game reserves all across the world will keep the industry healthy and alive for future generations.
Do Gamevest own enough land for all the animals?
Yes, Gamevest operations are conducted on more than 25 000 hectares of land, enough to facilitate a hundred thousand animals under intensive care conditions. All our animals are kept on high protein feeding programs, supplemented with savannah grass grazing.
What makes Gamevest unique?
In short, sufficient land, effective and proper infrastructure, expertise in wildlife management, skilled management and staff, specialised partners, top quality and pedigree animals and expertise in marketing and sales. The Gamevest asset base and track record speaks for itself.
What are the risks?
As with any business there are risks. Markets may shift. Prices may go down. Game numbers may rise or fall. Government might change policies. Insurance companies might refuse payments. Animals might die of disease. Gamevest has researched the industry, taken note of the past, listened to the experts, immersed itself into the industry, learned the ropes and as a result, understands the risks and the rewards. Thanks to our management style and implemented processes, we are confident that we are on the right track and can manage most of the risks associated with our industry. Insurance also plays a huge role in mitigating risks and until recently has been lacking in the industry. Due to a growing market it has now become the norm rather than the exception to insure animals to be captured and moved.
Can I insure my animals? If I do insure, is it expensive?
Yes, you can insure animals for capture, translocation, stress and normal cover against death. Insurance rates are in the order of around 2,5% to 6% of the animal’s value over a certain time period. It is in most cases advisable to insure your animals. Gamevest will advise on these options and introduce game owners to reputable insurance brokers.
Who manages the game? Who manages the finances and business?
Skilled and qualified Gamevest staff manage the game. Gamevest employs suitable people for each job. Qualified and skilled accountants and their staff handle all our financial management. We are privileged to have a Chartered Accountant as one of our business partners and have access to his entire team.
What about disease in your area?
The areas we utilise do carry certain diseases such as theileria, heartwater, etc. These diseases are managed and animals are treated before they enter our breeding system. With access to so many new technologies and expertise in the wildlife industry, it has become easier to identify and proactively manage and prevent the outbreak of disease.
Are my animals in danger of any predators?
No, Gamevest’s enclosures and breeding camps are predator-proof.
Who pays the accounts (i.e. veterinary expenses etc.) and how are these recovered?
Gamevest carries all general rearing and feeding costs. There is no cost to the game owner except for specific costs pertaining to a specific instance such as a sick animal needing attention or treatment from a veterinarian. Costs are recovered from the revenue on the sale of the first offspring before the profit split.