Lizo bought two Robben Island commemorative gold coins in 2011, after being advised that they would be a good investment. He bought the two 1/10oz gold coins for R5 000 each from The South African Scoin Shop at Clearwater Mall in Roodeport.

“I was informed that I would be able to receive a handsome return on the investment over the next three to five years,” says Lizo. But now he finds that the Scoin Shop is unwilling to buy back the coins. “The envisaged return on my investment is likely to be the initial R5 000 I paid for each of the gold medallions; which, had I known back then in 2011, I would not have bought the medallions because the whole purpose of the investment would be futile and of no value,” says Lizo.

When asked by City Press for a response, Sean van Kerckhoven, Brand Marketing Manager for Scoin Shop (The South African Gold Coin Exchange) said that “owning real gold coins and medallions, as with other alternative assets, is a long-term endeavour which is reliant on consumer demand for that specific product at that specific point in time.  The ultimate objective should be wealth preservation and not speculation. At The South African Gold Coin Exchange, we strongly advise against providing customers with a promise of future returns on their purchases. As market leaders, we have developed credible communication that educates our customers on the various elements that determine the value of gold coins and medallions.”

Van Kerckhoven added that Scoin Shop does not guarantee any re-purchases of gold medallions from their customers but that if they see a demand in the industry for certain coins and medallions, then they will repurchase the items from the client. Clearly there is little interest in Lizo’s 1/10oz Robben Island coins.

Van Kerckhoven also claims that “we provide a high standard of training to all our consultants so that they are equipped with the right knowledge to guide our customers which is neither misleading nor mistrusting in any manner.”

John Keogh, a coin dealer with 35 years’ experience and founder member of the Coin Dealers’ Association disagrees. “One of the roles of the Coin Dealers’ Association has been to educate the public so they do not get caught up in false promotions,” says Keogh who adds that coin collecting is a very specialised industry and as an investment class has made people significant returns, but only on very rare and collectable coins that go back hundreds of years.

For example, currently a 1931 complete set of South African coins would fetch around R250 000 and as a collectors’ item, it will increase in value due to its rarity, according to Keogh. Only 130 of these proof sets (sets that have been graded and sealed) were ever made and only 100 exist today, making them very rare.

The grading process analyses the coin for any imperfections or damage with a maximum of 70 points awarded to the most “pure” coin. “Most customers and even dealers could not tell you the grade of a coin by looking at it,” says Keogh. Although a grading system is beneficial for true collector items such as the 1931 proof sets, it is often used just as a marketing ploy.

R5 Mandela coin marketing scam

The R5 Mandela coin marketing scam is a good example. Twenty-two million R5 coins were issued ensuring that they would never carry any rarity value, yet people paid significant premiums for what Keogh describes as “a piece of plastic”. The newly minted R5 Mandela coins were sent to the US for packaging and grading, sealed in plastic and then sold as a “collectable”.

In terms of the gold Mandela coins or other commemorative coins such as the Robben Island coins purchased by Lizo, these were minted in Norway on behalf of The South African Gold Coin Exchange and the Nelson Mandela foundation and marketed through the Scoin Shops. Hundreds of these were minted and are really only worth the value of the gold they contain in the same way as a KrugerRand would be valued. “You can calculate the value by taking the rand price of gold today,” says Keogh, but they do not attract any premium as a collectable.

Lizo is in fact being very optimistic in believing that he would actually receive even the original R5 000 that he paid for each medallion. When he bought the coins in December 2011 the rand gold price was around R13 300/oz which means a 1/10oz coin would only have been worth R1 330. So he significantly overpaid for the coin. Currently the rand gold price is around R19 800/oz so the coins would only be worth R1 980 each.

Keogh adds that a promise to buy back a coin at its original value is only enforceable if it is in writing. So if a salesperson assures you they will buy back the coin when you want to sell, unless they put it in writing it is no promise at all. “Rare coins do make money but you must know what you are doing and work with a dealer you know and trust,” concludes Keogh.

This article first appeared in City Press.