Krugerrand: Right idea at right time

The guest of honor at the 2017 World Money Fair in Berlin in February was the South African Mint along with Rand Refinery. The distinction was bestowed by the fair organizers to mark the golden anniversary of South Africa’s best known numismatic export: the Krugerrand.

The first Krugerrands were struck on July 3, 1967. They were a new concept. They were – and are – legal tender of South Africa but carry no monetary face value. Instead their exchange rate is fixed daily and is determined by the spot price of gold. In other words they are bullion coins of changing value.

Each of the original 40,000 1967 coins, KM-73, was struck on a 32.77 mm (1.28 in) diameter, 2.84 mm (0.11 in) thick flan, weighing 33.9305 grams and consisting of .9170 fine gold, i.e., the actual gold weight was one troy ounce or 31.11 g. The alloy is the same as British gold sovereigns and contains 8.33 percent copper.

Since 1967 they have been struck every year with occasional slight variations in diameter and thickness. In 50 years more than 61 million have been produced containing over 58 million ounces of gold. The total value is over $70 billion at today’s prices.

By law the South African Mint is the only company allowed to manufacture South African legal-tender coins. These include the Krugerrand. All the gold used for the coins is supplied by Rand Refinery.

In the aftermath of World War II, the Bretton Woods Agreement established an international gold exchange standard. This system allowed countries to peg the exchange rate of their respective currencies to the U.S. dollar. They could also exchange dollar holdings for gold at an official rate of $35 an ounce. This option was not available to private businesses or individuals.

In post-war years the USA experienced an economic boom. By the late 1960s this had begun to flag with the first symptoms of stagnation appearing across the nation. One immediate consequence was to threaten the $35 gold price as more and more dollars were presented for redemption in gold. People who could count saw the United States running out of gold reserves.

A worsening economic environment in the U.S. fed an international monetary crisis and by 1968 Bretton Woods was on life support. On Aug. 15, 1971, President Nixon put Bretton Woods out of its misery. He unilaterally terminated the convertibility of the U.S. dollar to gold. He devalued. Gold went to $38 an ounce and then to $41.22.

Long before the end investors across the globe had abandoned the increasingly unstable world currencies and turned to bullion and other tangible assets. The market price of gold and silver soared. It was into this market South Africa launched its Krugerrand.

In 1967 South Africa was an apartheid state. The authority of the Boer-dominated government was absolute. It was to be expected that the designs of the new coin would feature symbols synonymous with Boer culture.

The obverse shows an effigy of Stephanus Johannes Paulus Kruger known as Oom Paul [Uncle Paul]. Kruger was a dominant political and military figure in 19th century South Africa. From 1883 to 1900 he was President of the short-lived Boer Zuid Afrikaansche Republiek [South African Republic].

As a person central to Boer history it was appropriate he should appear on the new 1967 coin to which he gave his name: Krugerrand.

The effigy is by Otto Schultz, die cutter at the Berlin Mint where the first coins were struck for Zuid Afrikaansche Republiek in 1892. Schultz’s design appears on the obverse of all the Boer’s 1892-1897 coins, penny to pond, KM-2 to KM-10.

The Krugerrand’s reverse by South African sculptor Coert Steynberg depicts a springbok (Antidorcas marsupialis) the national animal of the Republic of South Africa. This too was an existing homegrown coin design having appeared previously on the reverse of the Union of South Africa’s silver 5 shillings (KM-31, -40.1, -40.2, -41, -52) and gold pound (KM-43, -54) as well as the Republic’s gold rand (KM-63) and 2 rand (KM-64).

Steynberg’s design shows the animal pronking, a characteristic leaping in the air from all four feet simultaneously.

Tommy Sasseen, one of South Africa’s first home-grown die sinkers, was given the task of adapting Schultz’s and Steynberg’s original designs for the master dies of the 1967 Krugerrand.

“Krugerrand,” by the way, is a registered trademark of the South African Reserve Bank of which the South African Mint is a subsidiary.

The rand is the South African currency unit. It takes its name from the Witwatersrand, the “ridge of white waters” upon which Johannesburg is built and where most of South Africa’s gold deposits have been found.

The initial 1967 mintage of the Krugerrand was 40,000 plus 10,000 proofs. Just 20,000 were minted in each of the next two years, but the demand was there. In 1970 211,000 were struck. In 1971 the number jumped to 550,200 with 543,700 in 1972.

From 1974 to 1984 the annual production run was in the millions, peaking at 6,012,000 in 1978. During the great global bull gold market of the late 1970s and early 1980s Krugerrands accounted for 90 percent of all gold coins traded.

The demand was such that a series of fractional bullion Krugerrands were introduced in 1980: half ounce (16.97 g) KM-107, quarter ounce (8.48 g) KM-106, and tenth ounce (3.39 g) KM-105. These proved popular, particularly the smaller tenth-ounce coin.

The soaring mintages saw half the foreign exchange earnings of South Africa coming from annual Krugerrand sales. It is estimated that between 1974 and 1985 some 22 million of the coins were imported into the U.S. with 1984 sales in that country alone yielding South Africa some $500 million.

However, throughout the Krugerrand’s boom South Africa’s apartheid policies separating races were coming under increasing pressure. In the 1970s the nation was declared an international pariah. Its exports, including the Krugerrand, were prohibited in a number of Western countries, particularly those of the British Commonwealth. In October 1985 President Reagan instituted a Krugerrand import ban in the United States.

The success of the Krugerrand had led other national mints to exploit the gold bullion market. Each introduced its own distinctive design: the Canadian Maple Leaf in 1979, the Australian Nugget in 1981, the Chinese Panda in 1982, the American Eagle in 1986, and Britain’s Britannia in 1987. All were poised ready to fill the vacuum left by the Krugerrand ban. Private mints added their gold rounds.

At some point in the late 1980s the South African government recognized the apartheid system would have to change. The then Prime Minister bluntly told his white constituents, “adapt or die.”

In 1990 his successor opened direct negotiations with leading anti-apartheid groups. Media restrictions were lifted and political prisoners not guilty of other crimes were released. These included Nelson Mandela who received his freedom on Feb. 11, 1990, after more than 27 years of imprisonment.

Apartheid was dismantled from 1990 to 1993 and elections conducted under universal suffrage were held in 1994. The once-banned African National Congress led by Nelson Mandela won by a landslide.

Some changes were inevitable but a peaceful transition was achieved through introduction of a Truth and Reconciliation Commission. In large part this helped establish Archbishop Tutu’s “Rainbow Nation.” As part of this national reconciliation many symbols of former Boer South Africa were retained.

Nelson Mandela himself defended the springbok. It was his support that saw its continued use on the Krugerrand along with Oom Paul.

Following the end of apartheid, Krugerrand production dropped to 8,276 coins in 1998, but since then levels have steadily increased. They still have some way to go to achieve the record pre-sanction levels but last year more than 1.1 million Krugerrands were sold making it the world’s most traded gold bullion coin.

Over the years a number of Krugerrands and fractional Krugerrand varieties have been produced. These bear distinctive markings. Not all are commemoratives. Some are anniversary pieces. Others are special strikings.

Notable among these are the only gold Krugerrands to be struck outside the South African Mint. These were produced at Gold Reef City, an amusement park developed atop a former mine in Johannesburg. It includes original mine buildings and a replica of the Pretoria-based former branch of Britain’s Royal Mint. The latter included the fully operational Oom Paul Press used to strike gold ponds for the Zuid Afrikaansche Republiek.

In 1987 the South African Mint entered into an agreement with the park to allow for the private strikings of gold Krugerrands bearing a GRC mintmark. The inaugural striking took place on Jan. 30, 1987. Tenth, quarter, half and one-ounce Krugerrands were produced.

Subsequently private strikings were organized for groups and individuals. In 1988 the Mint invited subscribers to apply for strikings. The result was overwhelming. The sole complete sets were issued to the Transvaal Numismatic Society contained in blue South African Mint cases. Mintage was 30.

In 1987 the coin struck was the coin received. From 1988 on the obverses were struck at Pretoria. The partially struck flans were delivered to Gold Reef City Mint for completion often leading to mint errors. The series was discontinued in 1991.

Other special edition proof Krugerrands include (mintages in brackets):

Collectors need to be aware there are several gold Krugerrands on the market that purport to be specially struck but which were neither produced nor authorized by the South African Mint. An example includes a partly but crudely colored 2005 Krugerrand with diamond and the words “Star of Africa” above springbok. The South African Mint has never produced a colorized Krugerrand and regard the piece as defacement of legal tender.

Authentic varieties are listed in Brian Hern’s “Hern’s Handbook on South African Coins & Patterns” (privately published).

There have been some tweaks to the coin’s design since 1967. These are most apparent in details of the ground under the springbok particularly from 1982. At the same time the FYNGOUD 1 OZ FINE GOLD legend was repositioned.

Some changes are also obvious in the animal’s body. For example, in the original coins the legs were quite slim and elegant. They have become noticeably more robust over the years.

The occasional variations in size are readily seen in 1974 proofs and 1997 bullion strikes. Hern points out these coins will not fit into a Fisch Scale.

Proof versions of the Krugerrand have been struck in every year. From 1977 proof strikes have had a reeding of 220 vs. 160 for the standard bullion.

In 2011 a number of proof Krugerrands were found to be of reduced fineness. The Reserve Bank of South Africa subsequently confirmed this was indeed the case and that the coins concerned had been produced in April and May. Of the 1,500 minted in that period six had been found to be below the required weight. Two senior mint executives eventually fell on their swords although exonerated of any wrongdoing.

The bank informed dealers and collectors that any coins they felt did not meet the required specifications would be exchanged at the expense of the South African Mint.

For the coin’s 50th birthday the South African Mint has produced a range of Krugerrand sizes and types. To ensure consistency of design the South African Mint engravers returned to the original 1967 wax molds and artworks to produce these 2017 coins. For the first time the Mint has struck Krugerrands in both platinum and silver.

The resulting issues consist of (mintages in brackets):

Thirteen combination sets are available. The mintages given are for the single coins only, i.e. they exclude those in the sets.

All the above coins bear a 50th anniversary stamping described by the mint as a “mintmark.” Legislation requires that the non-gold 1 oz Krugerrands struck in silver and platinum bear the denominations R1 and R10, one and 10 rand, respectively.

The mint describes the 1967 coins as a “re-issue”. The original 1967 master dies were used to produce the coin and they are hence a restrike.

The 2017 silver Krugerrands are the first to be produced in this metal by South African Mint. Out in web-land frequent reference is made to earlier “silver Krugerrands.” Two of the more common bear 1982 and 1983 dates. The obverse carries the effigy of Oom Paul and the legend STEFANS JOHANNES KRUGER. The reverse has the springbok within a legend KRUGERRAND COMMEMORATIVE.

The 1982 “coin” claims to commemorate the 15th anniversary of the gold Krugerrand and has the date pair 1967-1982. On the 1983 issue the dates are 1967-1983. Examples of both 1 oz and 5 oz versions are frequently offered for sale on eBay. They purport to contain ONE TROY OZ .999 FINE SILVER – or FIVE TROY OZ.

None of these rounds are products of the South African Mint. They do not carry any reference to South Africa in their legends. All have been struck with coin alignment whereas regular gold Krugerrands have medallic alignment.

Importantly, the word Krugerrand” is trademarked. Hence to describe these as “silver Krugerrands” is in breach of that trademark. They are certainly not legal coins.

But, as is the way of the world, today it is possible to purchase imitations of the above imitations. In web-land “Custom SILVER Bullion Coin Medallion cheap KRUGERRAND COMMEMORATIVE coins” are currently being offered in 300 piece lots for $371.70, i.e. $1.24 each. These are replicas of 1967-1983 “commemorative” described above, even to bearing the legend ONE TROY OZ .999 FINE SILVER!

There are many many more. Lawrence Chard of Chard Coins provides details of some of the more common fraudulent pieces on an eBay page: “Beware Krugerrand Imitations in Silver or Miniature.” It may need updating. For example one international seller is currently offering “gold” replicas of the real McCoy in a range of dates and valued at $1.94 apiece.

This is at a time when one-ounce of gold is $1,300.

And for many moons there have been quality, fake, gold-plated, tungsten Krugerrands out there of correct weight and size. Someone has gone to a lot of trouble. Reported dates include 1978, 1984 and 1988.

Caveat emptor!

Denouement

Perhaps the final word can be left to Britain’s Daily Mail.

In 1974, just as the Krugerrand was capturing the world gold coin market, the newspaper felt the need to observe, “This strange coin – it contains exactly one ounce of gold – was invented by the South Africans in those far-off days (1967) when they were having trouble selling the stuff. So it doesn’t have the romantic ancestry of sovereigns, and sells on a premium just eight percent of its underlying gold value – against more than 30 percent for even the cheapest sovereign.” How typically British and how times have changed!

The quote was repeated, perhaps somewhat wryly, by South Africa’s The Star in 1974. It also features in Professor Francois Malan’s 50th anniversary book Krugerrand Golden Jubilee, Prestige Bullion, 2016, ISBN 0-620-74116-3. This is compulsory reading for all Krugerrand collectors. For those who want it, it comes complete with a 2017 gold Krugerrand.

Acknowledgement: The South African Mint and its staff contributed both images and information without which the story of the Krugerrand could not have been completed. Any errors or omissions are those of the author.

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