Mon, Apr 22, 2002 page19

• Forget bear markets -- in Zimbabwe it's elephants, buffalo, leopards and lions

  Zambezi Valley hunting futures have been described as being among the most dangerous derivatives on earth, and a balanced portfolio in pachyderms and blue-chip buffalo is no guarantee of a return on investment

  • BLOOMBERG
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  There are some real killings to be made on the Zambezi Valley Hunt Exchange. Baboon options are opening at US$9 per baboon, traders expect a stampede on bull elephant derivatives and phone orders from New York and London are overwhelming Zimbabwe's wireless circuits.

  It's open season again for bids to participate in the high-risk business of big-game hunting in Africa.

  

  Auctioneer Ian Ferreira poses in his home between a buffalo head, left, and a sable antelope head on Wednesday in Harare, Zimbabwe.

  PHOTO: BLOOMBERG

  As wildebeest grow fat for the annual Zimbabwe hunting season, over 300 great white hunters in jungle fatigues and crocodile-hide boots trek in from the bush every April and deploy beneath the onion-domed ceiling in the grand ballroom of the Meikles Hotel. Puffing meerschaum pipes and drinking beer served on sterling silver trays, the hunters unload their big-bore rifles and power up the calculators for the business of buying and selling 104 government contracts to hunt some 4,000 big-game animals in the Zambezi Valley wilderness.

  "These are very strange investments because there's no hedge against a cape buffalo," warns Anthony Williams, owner of African Hunter, a glossy magazine and tip sheet on how to survive the Zambezi exchange without being gored. "The buffalo is born mean and nasty," he explains a few moments before the opening bell.

  "You get one kill-shot. If you miss, your investment will stomp you bad. You don't die quickly, you don't die easily." It's not a market for the faint of heart. Williams says investors here best be familiar with how to leverage a .404-caliber H&H single-shot against a rampaging 3,000kg hippopotamus. As hybrid markets go, there's clearly none more volatile than the Zambezi exchange, where a 14-day option to kill a hippo this year sold for US$3,700 and traders say US investors pushed warthog futures to US$690 from last year's high of US$327.

  But while a pork belly contract on the Chicago Mercantile Exchange is a bet on which way hog prices will move over 90 days, a pork option here is a gamble on killing the pig over a 10 or 14-day period, all the while tracking the investment through the Zambezi Valley, most often with a 6.5-caliber Mauser. If the contract holder either wounds or fails to bag the trophy boar, market regulations stipulate the option cannot be extended and the warthog gets to go home with his bacon.

  Investment counselors here advise shareholders practice with at least 500 rounds of ammunition a week before executing a contract in the rugged 500km-long spine that runs from the Chizaria Hills in the east to the Mavuradohna Mountains in the west. "Zambezi Valley hunting futures are the most dangerous derivatives on earth," reckons exchange manager Ian Ferreira.

  "To play this market you must either be very brave or bloody stupid." Who's to doubt him? Questioning Ferreira's credentials in these parts can cause more of a stink than calling Ernest Hemingway a sissy. Dressed for floor action in a tie and safari vest, Ferreira is an expert on business along the Tropic of Capricorn and can trace his family's mercantile roots in Zimbabwe to 1496, when a relative sailed up the Zambezi River looking for gold with the Portuguese adventurer Vasco da Gama.

  Birth of the market

  An auctioneer by trade and a big-game hunter by inclination, Ferreira has run the one-day exchange for 27 of his 61 years. The market, he explains, is the descendant of the shadowy Zimbabwe tusker exchange, where foreign businessmen once gathered to haggle over ivory prices with local white hunters and native tribal leaders. In the mid-1960s the government banned the trade and created a regulated market to curtail the commercial slaughter of elephants and other endangered species.

  While traders encircle Ferreria with bids on tuskless elephants, towers of cash tumble out of bags and into the four bank-note counting machines whirring on clerk Penny Carritt's desk. The exchange treasurer bundles the bills in toilet paper and drops the take in an iron box for delivery to the bank.

  "This is Mickey Mouse money for foreign investors," Carritt says, wrapping cream-colored single-ply bog roll around a stack of 100,000 Zimbabwe dollars (US$1,787).

  Trading is momentarily suspended by what Ferreira suggests is the most hazardous of market threats: the putsi call, which is more of a shriek. It comes shortly after a trader notices that a tiny native insect known as the putsi has laid its eggs under his skin. As the bug's trademark blue welt erupts on the man's leg, Ferreira locks down the exchange and hollers for blacksmith and bush doctor Corn Smit to come in from the lobby with his Bowie knife.

  "Too deep to cut out," Smit says, sheathing his blade and grabbing an empty beer bottle off the floor. "Putsis are toxic and I don't want the poison seeping into your blood." "I don't care," the trader moans. "It hurts. Just dig the damn thing out." Instead, Smit flips open a lighter, heats the mouth of the beer bottle, and presses it hard into the wound. He then pours a pitcher of ice water on the warm glass to create a vacuum. The putsi pops out and Ferreira reopens the market with a US$7,000 option for a 14-day lioness hunt.

  Standing beneath the head of stuffed blue gnu in the foyer of his home, Ferreira says the exchange is immune to risks that include droughts and bush fires, floods and malaria, armed poachers, tsetse fly infestations, venomous black mamba snakes, annoyed environmentalists, food shortages and four separate currency exchange rates. Not to mention the government of strongman President Robert Mugabe.

  Mugabe's continued refusal to accept a new national constitution and hold free and fair elections after 22 years in power has plunged the country into violence and scared thousands of photo-safari tourists into taking their cameras and foreign currency to Kenya.

  The US and Great Britain recently declared the Mugabe regime a fraudulent government and imposed travel sanctions against him and his cronies. Human rights groups here say 50,000 people over the past month have fled their homes in fear of revenge attacks against those who in the last election supported his opponent, Morgan Tsvangirai.

  But Ferreira says big-game hunters don't care about the perils of politics. "Hunters on this level are naturally tough people," he explains. "They come here for the big four: leopards, lions, elephants and buffalo. Those are the blue-chip trophy animals."

  Still, big-game hunter Bill Bedford says he walks into the exchange each year certain the political climate will cause the market to crash. "It never turns out that way," the owner of Ingne Safaris explains. "The Zambezi Valley is a globally recognized brand name and the last place left to buy old-fashioned hunts." Kenya banned hunting in 1977 and South Africa offers mostly stocked antelope hunts, leaving Tanzania, Zambia and Zimbabwe the only countries where sport hunters can go after the big four.

  Ferreira reckons the thrill of tracking the big four across the legendary Zambezi Valley makes the exchange impervious to forces that would tumble markets elsewhere. This year 240 investors spent a total of US$3 million for the right to hunt trophy game from antelopes to zebras, a 131 percent increase over last year's close of US$1.3 million at official exchange rates. Ferreira says the numbers aren't an inflated indicator of market strength.

  "The official 55-to-1 exchange rate between Zimbabwean and US dollars is the same now as it was last year," Ferreira explains. "You can buy options with black market Zimbabwean dollars bought at 400 to 1, but the government will not let you take the trophy out of the country without proof of having exchanged the money at the official rate." Ray Townsend, the managing director of Chapungu Safaris, who this year spent a record-setting US$36,363 on a 14-day option to shoot a male lion, suggests there are ways around the currency regulations. He plops his feet atop a scruffy canvas duffle bag packed with millions of Zimbabwean dollars and declines to spill the beans.

  "I'm not telling anyone how we make money," he says to the laughter of other traders. Patting his ample stomach, which he fondly describes as "Mount Kilimanjaro," the 45-year-old big-game hunter grins and pours himself another beer.

  "My client who bought the lion is a 35-year-old Austrian timber magnate and money isn't a problem for him," Townsend says.

  "I've taken out 60 businessman-hunters every year for the past 14 years and very few are interested in African politics. They're prepared to mortgage the wife and sell the house for the opportunity to hunt in Zimbabwe. This is a mystique-driven market where the US dollar is king."

  That's a problem for Leon Oelsehig, a South African hunter who represents clients with only rand in their pockets. "American dollars now control the Zambezi Valley," he gripes. "I've been priced out by rich American duck hunters. They want to taste the fear of walking into a herd of angry elephants." But why? "Putting your life in danger from time to time breeds a saneness in dealing with day-to-day trivialities," muses local hunter Don Heath. "It gives you the enthusiasm to tackle normal days, when the most dangerous thing encountered is a taxi weaving through traffic on the way to work." Investors these days are mostly wealthy executives who view a big-game safari alongside renowned African hunters like Charls Grobbelaar in the same light as playing 18 holes on the Old Course at St. Andrews with Tiger Woods.

  Lining up a shot in the Zambezi Valley isn't cheap. "People looking for any of the Big Four are hard-pressed to spend anything less than US$7,000 for a maximum four-day hunt," says Grobbelaar, owner of CG Safari Services and chairman of the Zimbabwe Professional Hunters and Guides Association. "Big-game hunting in Africa is a sport for American dollars."

  Costly endeavor

  Depending on the price of the initial contracts, which can run from US$7,500 for a basic 10-day hunt (one buffalo, 10 antelopes and four baboons) to over US$100,000 for a 14-day safari with options to target the big four, local hunters separately charge upward of US$700 a day to equip and escort clients into the bush.

  For the novice, Grobbelaar offers a three-day special US$3,250 sable antelope hunt.

  "We don't let our clients go after the animals on their own," he says. "The rule pisses off a lot of American businessmen used to getting their own way, but if we didn't enforce it, we'd have a lot of dead executives out there."

  As for whom those businessmen might be, Grobbelaar isn't talking.

  One businessman-hunter, Bjorn Edlund, communications director at ABB Ltd, Europe's biggest electrical engineering company, says the silence is no surprise. "Big-game hunting in Africa is a taboo subject outside the boardroom," says Edlund, who hunts wild boar in France, bull moose in Sweden and has no plans to purchase a US$9,000 Zambezi Valley leopard option.

  "It just doesn't look good for a corporate executive to publicly admit he hunts elephants," Edlund explains. "They're supposed to shoot golf with clients." That didn't stop a vibrant secondary market for a US$45,454 bull elephant from taking place this year beneath the kudu antelope horns downstairs in the hotel's Explorers Club Bar.

  Market-tipster Williams says it's not unusual for a buyer to resell an option for a 30-percent profit.

  Still, a balanced portfolio in pachyderms and crocodiles by no means guarantees a return on investment.

  "A client two years ago bought a US$15,000 lion option and we never bagged it," Townsend recalls as a cellphone rings and interrupts his story. Moscow is on the line. "They wanted to confirm another July option for a tusker," he says after booking the contract.

  "Some dealers buy on spec, but not me," Townsend continues.

  "I buy what clients tell me to buy. Americans want the biggest and the best, the Europeans prefer going after older animals," he says, smacking Grobbelaar on the knee. "Though a few years ago there was that Spanish businessman who had the whole elephant stuffed for display in his home, right?" Grobbelaar swears the story is true and says he sees nothing odd about stuffing a 6,000kg elephant for the living room.

  "Some of these guys just take home elephant feet and make table legs out of them," he says.

  Back on the trading floor, hyena shares suddenly plunge from their high last year of US$290.90 to US$18.18 a share. The hyena market is collapsing and Ferreira says the 94 percent drop is no laughing matter. Though American hunters never have been keen on the carnivorous scavenger, Ferreira is perplexed because local investors have historically favored long positions in hyenas as a hedge against burglars.

  "Many criminals believe tribal witch doctors can transfer their spirits into hyenas, so people often hang a hyena head in their home to scare away thieves," Ferreira explains. "The drop either reflects that homes are saturated with hyenas or that criminals no longer are afraid of witch doctors."
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