How to sell a R5 coin for R50000.00
You must have come across commemorative coins in your loose change – the ordinary circulation coins that recall 10 years of democracy, the presidential inauguration in 1994, the cricket World Cup in South Africa and other milestones in our history. Some people may have saved a few of these coins in the hope that they will be worth a bit in the future.
The R5 coins with the face of former president Nelson Mandela have a special nostalgic appeal, and the most recently issued one was to celebrate his 90th birthday in 2008.
But would you believe it if you were told that one of these 90th birthday coins sold for R2.5 million? Others sell for anything between R50 000 and a couple of thousand rands.
These, remember, are simply R5 coins. There is nothing special or rare about them – more than 22 million were issued by the South African Mint.
But a lucrative trade has developed in which clever sellers convince gullible buyers that certain R5 Mandela coins are extremely rare and are therefore worth a lot of money. Any coins could be sold in this way, but by far the most popular is the Mandela 90th birthday R5, issued in 2008, so this article will concentrate only on these coins.
The scheme is very simple to see through if you have a basic grasp of coin grading. It works like this.
First, the seller needs a supply of coins that have never been in circulation, plus a company to grade them and a population report. A population report, or census report, shows how many coins of a particular type have been given a particular grading.
The coins sold for hugely inflated prices have never been circulated, unlike the coins that arrive with your change from the supermarket teller or newspaper vendor. Instead, these coins were bought in their hundreds of thousands direct from banks and the South African Mint. They are then sent to the United States for grading, which, in the simplest possible terms, means an assessment of their features, such as the lustre, appearance and number of imperfections of each coin.
When the coins return to South Africa, each is encapsulated in a Perspex slab that shows which company graded it and what grading it was given. This process is also called “slabbing”.
The sellers are able to market any coins that come back with a grading between MS70 (perfect) and MS60 (a coin that only just qualifies as uncirculated and has visible scratches). MS refers to “mint state” (see “How the grading system works” on the previous page for a basic explanation of grading).
Now the R5 brigade can start working their sales channels, phoning clients or putting the coins on an auction website such as Bid or Buy.
The marketing can take two angles: the high quality of the coin or, if the coin is not of a particularly high quality, then the rarity of the coin in its particular grade. Both angles rely on the buyer’s ignorance of what is meant by rarity.
The following extract is from Bid or Buy and is the sales pitch for a coin that was graded MS60: “The elusive MS60. Very scarce in this grade. The one you can never get your hands on.”
The coin sold for R5 501 on October 9, 2011.
And, in one sense, the seller was not lying when he or she said the coin was “very scarce in that grade”. The population report almost certainly said there were not many Mandela R5 coins that had been given that grade. But that is not an indication of rarity out of the whole universe of R5 Mandela coins – just that not many have been sent for grading and emerged with that grade – they are what numismatists call conditional rarities.
“Far from indicating great rarity, a low population actually might reflect extreme commonness: a high-mintage modern coin, for instance, might have a low population in one of these reports simply because hardly anyone has bothered to submit any pieces for certification. Having little or no premium value, they aren’t worth the bother and expense of being certified,” Scott Travers Rare Coin Galleries writes in “10 myths about the modern coin market” (www.pocketchangelottery.com/article62.htm).
It is not worth the bother and expense … except for a seller who can find gullible buyers.
As a participant in the Bid or Buy coin collectors’ forum noted in May 2010: “Why on earth are bidders paying upwards of R16 000 for 2008 Mandela birthday R5 graded MS61?! That’s like paying R400 000 for a 2005 Ford Fiesta … simply because the car dealer has fewer 2005 models in his showroom.”
Even the “very scarce” selling point will not last long as the popularity of this trade catches on.
In mid-October 2011, US grading house Numismatic Guaranty Corporation (NGC) said in the “Research” section of its website that it had graded more than 115 000 examples of mint-state Mandela 2008 coins.
And the National Association of Numismatic Societies has been informed that every month about 24 000 Mandela R5 birthday coins are sent for grading in the US, Peter Wilson, the chairman of the association, says.
“The biggest problem in numismatics at the moment is the Mandela R5 coin. That’s where the bulk of the rip-off is occurring. These guys (the sellers) are doing immeasurable damage to the noble hobby of numismatics.”
Wilson says prices have got to “ludicrous” levels.
What can be more ludicrous than one of these coins selling for R2.5 million?
The website of a Gauteng company, SA Coin, says that’s the price achieved for an uncirculated MS69-graded Mandela R5.
Gerrit Marx, the operations manager of SA Coin, confirms the company made the sale in June 2010 to a buyer who wants to remain anonymous. “When the MS69 was sold, there was only one of them in the world. The price was market-driven,” Marx says. “Because there was only one, the seller wanted that price. We got him a buyer.
“This particular individual [the buyer] does not want to be public on this particular issue – we need to respect his privacy. But that buyer is up to today one of our biggest investors.”
At about the same time as the R2.5-million sale – also in June of that year – a Mandela 90th birthday R5 coin with the same grade from NGC was sold on auction site Bid or Buy for R51 600. Marx says of the Bid or Buy price: “It is not reflective of market value.”
He says none of the coin dealers will put a coin up for sale at a price below the market value. And market value, he says, “is the overall accepted sense of the value of a coin among dealers who have experience in the field”.
At the time this article was concluded in late November, nine coins had been graded MS69 by NGC, Marx says, although he conceded he had not checked the population report for two or three weeks.
He is not perturbed by the increase in the MS69 population over the 18 months since that multi-million-rand sale, or for the implications this has for the price of the coins.
The SA Mint will not release any more of the 2008 coins and it is also the nature of the coin that makes it special, he says. “Never in history has a coin been struck for a living former president for his birthday. That is what made the 2008s so much in demand – I call them blessed.