In today's Finshots we talk about the illegal ivory trade and why some countries want the ban lifted

Before we get to today’s story, if you’re someone who loves to keep tabs on what’s going on in the world of business and finance — why aren’t you subscribed yet? We’ll send you this newsletter every morning with crisp financial insights straight to your inbox. Subscribe now!

If you’re already a subscriber or you’re reading this on the app, you can just go ahead and read the story.

The Story

Just a little over a month ago, cheetahs made a roaring comeback in India. After about 70 years of going extinct, we released 8 cats (they have names ― Elton, Freddie, Oban, Sasha, Siyaya, Savannah, Tbilisi and Aasha) into Madhya Pradesh’s Kuno National Park. We got them from Namibia.

But soon, the Indian Express had another story. It reported that Namibia had sought India’s support to lift the ban on ivory trading by inserting a clause in the MoU we signed in exchange for the cheetahs. This obviously got us thinking — Why would Namibia want India’s support in the matter? And why does it want the ivory ban to go?

Well, it’s a complicated story. So let’s take it from the top.

Ivory has always been a priced commodity. Early humans used ivory from mammoth tusks to fashion bracelets and figurines. More recent civilizations sourced ivory for its status symbol, religious purposes and good luck. They’re also used in luxury items, billiard balls, and piano keys. And they’ve made their way into the gifting culture of late. To put it plainly, there is a perception that ivory, is “rare, precious, pure, beautiful, exotic, and more importantly, that it confers status to not only the receiver but the giver of the gift.” Unfortunately, the persistent demand imposes a huge ecological cost on the planet — especially the elephant population.

Why? you ask.

Well, elephants don’t shed their tusks. You either have to kill them or severely injure them to extract ivory. Meaning there’s a dead elephant behind every piano key, billiard ball, chess set and decorative item that’s fashioned from ivory. This also means you have a biological constraint. There’s a huge demand for ivory, yet you only have so many elephants. The demand pushes prices higher which incentivizes poachers to hunt even more elephants. It’s a vicious cycle.

This is most obvious when you look at the elephant population in Africa. At the beginning of the 20th century, there were over 5 million elephants roaming the continent. By 1979, their numbers had dropped down to about 1.3 million. Between 1979 and 1989, their population dropped by 50% with only 600,000 elephants remaining. And this had a visible impact on the ivory trade with prices rising each year. As one article in the Frontline notes — “In 1980, the price of raw ivory in the open market was around Rs.1,300 a kg; in 1989 it had crossed Rs.3,000; by 1995 it was Rs.5,000, and by 1996 it was Rs.10,000.”

At this point, you’re probably thinking — “Why are we still stuck in the 20th century? Why is this analysis confined to odd years like 1989?”

Well, something happened that year. The Convention on International Trade in Endangered Species (CITES) — an international agreement between governments of 184 countries, banned the international trade of ivory and associated products, to protect the gentle giants. This scuttled poaching to some degree and elephant populations did recover in a few pockets. And while their numbers continue to decline globally, there’s renewed hope in some parts of Africa. For instance, Angola, Botswana, Namibia, Tanzania, Zambia and Zimbabwe together host more than 400,000 elephants today. Zimbabwe in particular is dealing with a problem of excess. As of 2019, Zimbabwe had 85,000 elephants while the country’s national parks and conservation areas only had the capacity to host 55,000 elephants.

What happens to the rest? Well, they stray and often come in contact with human populations. They destroy crops, trample on humans, and are a menace in general. In fact, farmers living near conservation areas have complained of losing nearly 17,300 acres of crops to straying elephants. And elephant populations continue to grow unabated in some areas.

Then there is the matter of ivory itself. When elephants die, the ivory isn’t buried. They’re extracted. And officials don’t just do away with ivory products when they seize shipments. They confiscate it. On some occasions, countries have burnt ivory stockpiles to make a statement against illicit ivory trade. But in most cases, you just see a steady buildup of ivory.

This is why a few African countries have lobbied for relaxation. Their argument is simple — They’ve protected elephants. They’ve ramped up conservation efforts and now they have lots of ivory lying around. It’s only fair that they get to decide what to do with them, no?

So CITES lifted the ban on ivory products and offered a one-time permit in 1997 and 2008, to monetise piles of cached ivory. This temporary measure helped Botswana, Namibia and Zimbabwe sell 50 tonnes and 108 tonnes of ivory to Japan and China, generating revenues of $5 million and $15 million respectively in those two years.

These countries also used some of these proceeds to aid conservation efforts.

Which finally brings us to the story today. Namibia wants the ban gone. Many African countries will also lobby for the same. And in two weeks, the parties to CITES will meet to discuss wildlife and conservation efforts. This is where their proposal will be heard. And India’s support here could prove invaluable. The CITES has already rejected their demands in 2016 and 2019. But if the countries could drum up support from emerging economies, maybe they could turn the tide.

Maybe!

However, India is unlikely to relent. And for good reason. Lifting the ban may do some good. But, the damage it does is irreversible.

As one article in the Economist notes —

“The existence of even a small legal market increases the incentive for poaching. It allows black-marketeers to pass off illegal ivory as the legal variety, and it sustains demand.”

And India lives by this maxim. We don’t like the ivory trade. We have $250 million worth of ivory just lying around and we haven’t reconsidered the ban at any point. In fact, the government soon released a press statement debunking the Indian Express story and clarifying that it hasn’t received any written communication from Namibia seeking support. It reads, “As sovereign countries both India and Namibia will evaluate their positions on sustainable biodiversity utilization within the ambit of agreement based on the principles of mutual respect, sovereignty, equality and in the best interest of the parties.”

So yeah, it seems India isn't going to support the ivory trade any time soon.

But will African countries still get some reprieve from CITES?

Well, we will just have to wait and see.

Until then...

Don't forget to share this article on WhatsApp, LinkedIn and Twitter

Ditto Insights: Which is better? A term plan or an endowment plan

Nobody wants their dependents to suffer financially in their absence. And a life insurance plan protects your family from this kind of contingency.

And within life insurance, people mainly go for term or endowment plans. So the burning question- which one’s better?

For starters, a term plan provides financial coverage for a particular period. If the insured dies during the policy tenure, the family gets a death benefit.
An endowment plan also does the same thing.

Now, cards on the table: term plans have lower premiums, and the risk coverage is significantly higher since the premiums go towards the sum insured alone.

Whereas, in Endowment plans, the sum assured is quite low and doesn’t really solve the main purpose i.e. financial protection. The USP of an endowment plan is it offers a lump sum as a maturity benefit if the policyholder survives the policy term. But, the returns offered by these plans are lower compared to other financial instruments.

So, the investment use case isn’t effectively achieved either.

All in all, it’s best to keep insurance and investments separate. If the end objective is saving money, one can get better returns by deploying the extra savings in better financial instruments. And since the objective of buying a life insurance policy is to secure the financial position of dependents, it’s best to go for a term plan since the coverage is higher at a lower cost.

Speaking of, we provide free consultation on buying the perfect term plan. So if you need any help in that area, just book a call.

1. Go to Ditto’s website — Link here

2. Click on “Book a FREE call”

3. Select Term Insurance

4. Choose the date & time as per your convenience and RELAX!

And our advisors will take it from there!