5/30/2014 Why does Johann Rupert invest in buffalo?

- Investment Insights | Moneyweb

http://www.moneyweb.co.za/moneyweb-investment-insights/can-game-farming-outperform-the-jse 1/3
Author:AntoinetteSlabbert | 09October201307:26
InvestmentInsights
Why does Johann Rupert invest in
buffalo?
ThemostmodestperformeramongraregamebeatstheJSE.
PRETORIAWhydoheavyweightbusinessmenlikeCyrilRamaphosaandJohannRupertinvestinbuffalo?Perhaps
becausetheyknowinvestmentingamefarmingcanoutperformthatofpropertyandtheJSEAllShareIndex,saysgame
farmerJohanvanderMerwe.
ThegameindustrysannualturnoverhasgrownfromR62milliontoR864millionoverthelasttenyears,asmeasured
bygameandlivestockmarketerVleissentraalsauctions,andtheresstillalotofpotential,saysVanderMerwe.
WiaanvanderLinde,ownerofWinterhoek,agamefarmoutsideKimberleyandWildlifeRanchingSouthAfrica(WRSA)
director,saysgamefarminggivesahigherreturnperhectarethananyotherfarmingactivity.
Mostpeopleallocate2030%oftheirinvestmentportfoliostoriskierinvestmentsanyway.Theycanallocateittogame
andexpectareturnof2842%,conservativelyspeakingheexplains.
Highercapitalinvestmentisrequiredatfirst,tobuyalltheraregamespecies,suchasbuffalo,rhino,blackimpala,sable
andLivingstoneeland.Thiscreatesopportunitiesforinvestorswhoarenotfarmers,peoplelikeRamaphosaandRupert.
Thenewkindofinvestorwillalsoseetoitthatwemaintainthecurrenthighlevelsofreturn,VanderLindesays.

Returnoncapital
Thebulkoftherevenueoverthelasttenyearswasfromrarespecies(R788million),butVanderMerweexpectsthe
priceofkudu,forexampletogrowexponentially.WeusedtopayR7000forakudubull,butnowtheyfetchuptoR800
000.Itisallaboutthelengthofthehorns.
Hebreedsraregameandplainsgame(iegiraffe,kudu,blackwildebeest,nyalaetc)onhisfarmbetweenHoedspruit
andGravelotteinLimpopo.HealsowontheWRSAbiodiversityawardlastyear.
LastyearbuffalofetchedthehighestaveragepriceperanimalofallthelocalraregamespeciesatR835763and
delivered37%ofindustryturnover.ThesameanimalwouldhavecostonaverageR610550in2011andR424050in
2010,saysVanderMerwe.TheaveragepriceishoweverstillfarlessthantheR40millionJohannRupertrecentlypaid
foraCapebuffalobull.
RoanfetchedR208463onaveragelastyear,asopposedtoR116250theyearbefore.Seegraphbelow.
Source:JohanVanderMerwe
Atotalof9825plainsgameand1751raregameweresoldlastyear.
Takingintoaccountthevalueoftheoffspringandproductioncost,VanderMerwesaystheannualreturnoncapital
employedcanbe84.86%peryearonnyala,130%onblackimpala,breedingwithregularimpalaewes.Sableisthe
mostmodestperformeramongtheraregamewitha31.2%annualreturnoncapital.
Incomparison,lastyeartheJSEAllShareIndex(ALSI)showedatotalreturnwithdividendsreinvestedof26.68%.
Gamebreedingalsoclearlyoutperformsinvestmentinproperty,whichhasatypicalreturnof10%.
Since2007ithasoutperformedtheJSEALSIandtheDowJonesandifweincludethisyearwewilldoevenbetter,
insistsVanderMerwe.Seethegraphbelow
NEXTONMONEYWEB X
Randappetitereachinglimit
5/30/2014 Why does Johann Rupert invest in buffalo? - Investment Insights | Moneyweb
http://www.moneyweb.co.za/moneyweb-investment-insights/can-game-farming-outperform-the-jse 2/3
Source:JohanVanderMerwe
Hunting
Demandseemstobedrivenbytrophyhunting.RestrictionsonhuntingincountrieslikeBotswana,Tanzaniaand
ZambiahavebenefittedthelocalhuntingindustryandtherestofAfricaisperceivedasdangerous.SouthAfricaand
Namibiaaretheonlytwodestinationsseenbyhunterstobesafetovisit,VanderLindesays.
HansVermaak,presidentoftheProfessionalHuntersAssociationofSouthAfrica(Phasa)believestheprofessional
huntingindustryhashugepotentialtogrow.
Theannualincomefrominternationalhuntersin2010wasestimatedatR557million.Thisincludesthehuntersday
fees(safari,accommodation,etc),aswellasthetrophyfeesforanimalshunted.Itexcludesthevalueaddedby
taxidermy,flights,sightseeingactivities,rifleimportpermitsetc.
HebelievestheofficialnumberofforeignhuntersvisitingSouthAfricaisincorrectlypeggedatabout5000perannum.
InformationreceivedfromexitpollsatORTamboshowthatapproximately11000foreignershuntedinSAin2011.
Vermaakisconvincedthattheannualincomefrominternationalhuntersisalsovastlyunderstated.
NorthWestUniversityhasdoneastudytoquantifythewholevaluechainandPhasashouldpublishnewstatswithina
monthortwo.
In2010thelargestportionofforeignhunterscamefromtheUSA,SpainandDenmark.Sourcemarketsalsoincludethe
UK,Germany,France,Norwayandvariousothercountries.Thebiggestaggregateincomeperspecieswasforlion
followedbywhiterhino,kudu,nyala,sableandbluewildebeest.
Vermaakemphasisesthatprofessionalhuntingwithclientsfromabroadisahighvalue,lowimpactindustrythathas
beensustainablesincethe1960sandearly70s.SomeofhisAmericanclientspay$28000foragroupoffivepeople
comingonatendaysafari,indailyratesonly.Thishasaddedeconomicbenefits,asmanyclientsextendtheirstayto
otherpartsofSA.
Hesaysthebiggestthreattotheindustryisanimalrightsorganisations.In1978theysucceededinhavinghunting
bannedinKenyaandsincethenKenyahaslost85%ofhiswildlife,saysVermaak.Huntingplacesavalueonwildlife
andwildplacesthusensuringanincentivetoprotectwildlifeandthehabitat.Theprivatesectorownsthreetimesmore
landsetasideforwildlifethanallofSouthAfricasstateparksandreservescombined.
Ahighburdenofcomplianceandthelackofstandardisedregulationsoverallnineprovincesarechallenges,butPhasa
isworkingwithgovernmenttowardscentralisedsystems.
Risks
VanderLindebelievesfinancialinstitutionsaremissingtheboatbynotfinancinggameandwillwakeuptothe
opportunityoneofthesedays.
Ibelievetheriskissmallerthanwhatpeoplethink.Youhavetodoyourhomeworkandmakesurethatyoudobusiness
withreliablepeople.Therearegoodfarmersoutthereandtherearemoregoodpeopleintheindustrythanbadpeople,
hesays.
MembershipbodieslikeWRSAcanbeafirstcheckpointtoensurethataprospectivebusinesspartnerisaboveboard
andhasapropertrackrecord,saysVanderLinde.
Diseaseandotherriskscanbemitigatedbytakingoutinsurance.Iinsureallmyanimalsforoneyear,saysVander
Merwe.
Whilebreedinggamerequirescapitalinvestmentinlandandbuildingaherdwithcriticalmass,VanderMerwesays
manyfarmerstakeinvestmentsfromoutsideparties.Eventhosewithouttheland,skillsandknowledgecanparticipate
andfollowinthefootstepsofbusinessgiantslikeRamaphosaandRupertandreaphandsomebenefits.
Topics:GAMEFARMING,INVESTMENTINSIGHTS,HUNTING,CYRILRAMAPHOSA,JOHANNRUPERT
5/30/2014 Why does Johann Rupert invest in buffalo? - Investment Insights | Moneyweb
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