Clever marketing is used to create a market in what are being called rare coins.
Clever marketing is used to create a market in what are being called rare coins.

‘Investors’ in R5 Mandela coins ripped off

By Angelique Arde and Margie King Time of article published May 11, 2014

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If you have paid thousands of rands for a R5 Mandela coin, which you bought as an investment, you are neither an investor nor a collector. You are a “victim”, Glenn Schoeman, the president of the South African Association of Numismatic Dealers, says.

A R5 circulation coin commemorating Nelson Mandela’s 90th birthday is worth R5. It contains no precious metal and it is not rare. But cunning dealers, exploiting Mandela’s iconic brand, have talked up a market around these coins, which are on sale for anything from a couple of hundred rand to R1 million.

“The biggest problem in numismatics [coin collecting] at the moment is the Mandela R5 coin. That’s where the bulk of the rip-off is occurring,” Peter Wilson, the chairman of the National Association of Numismatic Societies, says.

“We have been warning the market for some time: there is little that’s rare about the Mandela R5 coin. And, no, it is not an investment,” he says.

People have been hoarding the coins since they came into circulation, Wilson says.

About 22 million R5 Mandela coins were minted in 2008, according to Hlengani Mathebula, the head of group strategy and communications at the South African Reserve Bank (SARB). The coins are manufactured by the South African Mint, which is a subsidiary of the SARB. The mintage is confirmed by Hern’s Handbook of SA Coins.

“The commemorative Mandela circulation R5 coin that was issued in 2008 to commemorate former president Nelson Mandela’s 90th birthday is worth R5, or whatever a buyer is willing to pay for it,” Mathebula says.

He says the SARB issues “commemorative circulation coins” as part of its production of currency – to commemorate an event – and such coins are made available to the public at face value. “Such coins are always minted in large quantities,” Mathebula says.

These are made up of coins destined for circulation and proof coins, primarily meant as momentos and intended for collectors.

A vast majority of the Mandela coin market is in coins meant for circulation, although proof coins do go for high prices and there is trade in them (see “What is a proof?”, below).

Schoeman says the market for Mandela coins has been “created by clever marketing”.

The marketing relies on the claim to rarity, and this claim depends on the condition of the coin. Coins show signs of wear and tear very rapidly, and as soon as they go into circulation, they pick up abrasions. So it could be argued that it is rare to find a perfect or near-perfect uncirculated coin. Somehow thousands of bags of coins have been siphoned off from the normal distribution channel from SA Mint to SARB and then to the banks and kept out of circulation.

Sealed bags of uncirculated R5 Mandela 90th birthday coins – 400 coins per bag – are available on the Bid or Buy auction website, and have been since 2008 (see “Bid or Buy responds”, below).

The reason people are willing to pay so much is that these uncirculated coins qualify for an MS grading – which the coins in your pocket could not. Uncirculated coins are sent to companies in the United States or to the South African Numismatic Grading Service, and they are returned in a small perspex case with a grading.

In the Sheldon scale used in the US to grade coins, “MS” stands for “mint state”. It is followed by a number indicating the surface quality of the coin. At one end of the range, MS70 is awarded to a perfect coin, while MS60 indicates the coin has scratches that can be seen with the naked eye (the coins in between – those graded MS61 to MS69 – have varying degrees of imperfection).

The marketers claim that, because there are so few coins rated MS69 or MS68, these are fantastically valuable and will continue to rise dramatically in price.

One flaw in the claim to rarity is that the number of coins being rated MS69 or MS68 is growing – and few, if any, people know when the population will level out. (There are no coins graded MS70.)

A Johannesburg company called SA Coin says it sold a Mandela R5 graded MS69 in 2011 for R2.5 million; it was, it said, the only one in existence at the time. The following year, SA Coin told Personal Finance there were nine Mandela R5s with this rating. By yesterday, there were at least 13. The selling price has come down to R1 million at SA Coin, which projects that the coins will be worth R3 million in five years.

It is easy to establish the number of coins that have achieved particular grades, because grading companies keep population reports. What is not known is how many uncirculated coins have yet to be graded, but, as they are graded, they will swell the populations more.

SA Coin says that 300 000 R5 coins have received grades already, and it expects another 25 000 to be submitted for grading this year.

While the selling technique emphasises rarity, on one hand, it emphasises, on the other hand, how precious the coins are and how quickly the value increases.

SA Coin, which deals mostly in R5 Mandela coins, says it has sold coins worth more than R125 million and that last year its turnover was R28.2 million. Mark Andersen, one of SA Coin’s directors, says “the rare Mandela coins” are the “fastest-appreciating rare coins in the history of the world”.

According to SA Coin’s website, the MS69 that sold for R2.5 million “grew at a staggering 49.9 million percent in total, or 12.45 million percent per annum”. This computes correctly if the starting value is R5.


Included in the 22 million coins minted to commemorate Nelson Mandela’s 90th birthday in 2008 were 19 000 proof coins and what the SA Mint calls “proof-like” coins. Proof coins are intended for collectors, and in the case of the Mandela R5 birthday coins, they were also distributed to dignitaries.

The process of minting a proof coin is different from that of ordinary circulation coins – it is more labour-intensive and the finish may be highly polished and/or contain areas of “frosting”. When graded, it takes the PF prefix (as opposed to “MS” for coins produced for circulation).

The SA Mint told another publication that it distributed 5 000 sets of proof coins and 14 000 “proof-like” coins. These coins were protected in capsules soon after they were minted. For this reason, you can expect the surface quality of such a coin to be higher than that of uncirculated coins kept in bags of 400.

As a result, SA Coin, a company that deals largely in Mandela coins, says 101 coins have been graded a perfect PF70 and 2 215 are PF69s. Because of the populations, SA Coin considers these highly graded proofs valuable, but not as valuable as high-grading coins intended for circulation.

SA Coin says it has sold PF70s for R275 000, and it projects that the coins will be selling for R450 000 at the end of this year and at about R1 million at the end of 2015. On Bid or Buy, there is one available at R295 000, with no interest expressed.

“The next coins that we expect to dramatically rise in value are the proof 69s.” SA Coins says they sell for R35 000 at present and “are expected to be selling at R65 000 by the end of 2014 and R110 000 at the end of 2015”. On Bid or Buy, auctions of three of these coins have just expired, with no takers at the offer prices of between R20 000 and R25 000 – and not a single bid.

The problems of how the prices for high-graded proofs are set, the potential problem of resale, and the confusion among buyers who do not understand the products are the same for proofs as for mint-state uncirculated coins. But proofs differ in that the potential pool from which the population of high-graded coins can be drawn is known – it is 19 000.

The pool that is the source of high-grading mint-state coins is 22 million. Of those, 300 000 have achieved an MS grade, and no one knows how many remain uncirculated and ungraded – which undermines rarity and perceived value.


When the 2008 Mandela R5 coins were released, the South African Reserve Bank (SARB) informed Bid or Buy that it objected to bags of coins bearing the seal of the SA Mint being sold or auctioned off on the e-commerce website, Cuan Akal, Bid or Buy’s operations manager, says.

“We, of course, heeded the Reserve Bank’s objection and informed our sellers about this. In the beginning, we asked them to remove all listings offering bags of coins from the site. After receiving further clarifications from the SARB, we allowed the sellers to list the sealed bags with coins, but to remove the SA Mint seals from the images. Today, there are far fewer bags of R5 Mandela coins listed on the site than there were in 2008, probably because people are hoarding them.”

Akal says the website cannot become involved in setting the value of collectibles or in determining whether items are collectibles. “It is up to the market forces of supply and demand to set the price.”

Lana Stevic, the marketing co-ordinator for Bid or Buy, says it is impossible for Bid or Buy to ascertain how many bags of Mandela R5 coins have been sold on the website since 2008, or to give an indication of the highest price achieved for a bag.

But a search on the site shows that, over the past week alone, there have been two orders for bags of Mandela coins.


SA Coin this week insisted on the mintage figure of five million Mandela 90th birthday coins, which it uses repeatedly on its website and when talking to the media. The South African Reserve Bank (SARB) says that 22 million coins were minted.

SA Coin spokesman Eion Blignaut agrees with the statement on the SA Coin website that coins retain their value as long as the number of coins in that grade stays the same, and that the number of coins in various sought-after grades is continually rising, reducing prices – in the case of the MS69, from R2.5 million to R1 million currently.

“How far you are from the top [of the population of any grade]? We know because we do our homework.”

But the number of coins being sent for grading, any one of which may grade high, continues to climb.

Blignaut told Personal Finance that 5 000 were sent between January and the end of April this year, and, on its website, SA Coin says it expects 25 000 to be sent this year.

Blignaut says the value of these coins is not listed in directories such as Hern’s and prices are set by the market. “Prices are determined by auction sites, dealers,” he says.

SA Coin’s price includes the provision of services, such as information, and “we will assist [buyers] to sell [coins] after five years”.

Any buyer who paid R2.5 million for an MS69 – “an investment” – could feel that they have been misled or paid an unfair price. And what proof does SA Coin have that it, in fact, sold a coin for R2.5 million?

“You can see proof. Go ask Beeld. We have shown them … the receipt,” Blignaut says. “We can prove it. It is a genuine price we can substantiate on any official questionnaire.”

He agrees that SA Coin is “probably” the market maker of prices of Mandela coins, and says the company is the dominant player, in that it “started the grading concept”.

“We are not a coin seller; we want to talk to people.”

Would he say he was an adviser? “Yes, [we are] advisers.”

Yet SA Coin’s website tells readers to “make sure you are a significant investor in these coins. You should, in any of the rare Mandela R5 coins do, a little financial stretching if necessary.”

Personal Finance suggested to Blignaut that this was reckless.

He says a coin at one grade sells at R20 000 and the next grade at R35 000, because the population of the higher-graded coin is 1 000 fewer. So a buyer would be encouraged to try to buy the higher grade. “Get the highest grade possible, because it will give the best return possible.”

Does SA Coin get cases of buyer’s remorse, he was asked. “Lots of cases of buyer’s remorse; like normal human beings. But people who follow our principle of holding for a five-year period are not unhappy. People who bought houses five years ago are crying – it’s not the builders’ fault.”

When asked how many coins SA Coin had sold on mandate (resold for buyers from SA Coin), Blignaut said: “Depends on market conditions and time period. At the moment, the market is very quiet. Depends on the price asked.” When pressed, he said: “I don’t know the number. Coins come and go on a daily basis.”

One sentence on SA Coin’s website reads: “There is no lack of liquidity ... The only factor that leads to a client not selling the coin that they may have is the price that they are offered is too low.” When asked about that, Blignaut responded: “We have never guaranteed a price.” He immediately went on to explain that, if a person wants to sell and has two of the same coins, the company suggests upgrading, “swapping”, one for a higher-grade coin.

When it was pointed out that that would involve a big jump in price, Blignaut replied: “Do you want a rare coin or a gewoonte [ordinary] one? Do you want a Merc or a Toyota? What do you want? Do what you can afford.”

He did also say: “I have advised people not to buy because of their budgets.”

The SARB’s Hlengani Mathebula says: “While there are many honest and reputable coin dealers that offer collectable coins at fair prices, there are also those that can charge unrealistic prices, or sell coins that are only worth their face value to the public at inflated prices. Members of the public are advised to do their homework before deciding to transact.

“The SARB urges consumers to familiarise themselves with the differences between a circulation coin and other limited edition coins.”

“The bubble has burst on most Mandela coins,” Brian Martin says. Martin is the former ombudsman for short-term insurance and a keen numismatist.

“The market was driven by hype over Mandela, not fundamentals. In numismatics, it is all about rarity and quality, which is determined by the grading status of a coin.

“The Mandela coins are not rare – they were made in large quantities, and many high-grade specimens exist, as not many found their way into general circulation,” he says.

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