Selling a Kruger Rand for more than its face value

In the Name of Allah, the Most Gracious, the Most Merciful.

As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.

A Kruger Rand is a 22 carat South African gold coin, containing 91.67% of Gold. The coin has a face value of 1 Rand. The face value of a coin is its original intended value, i.e. the value the government assigned to it at the time of minting. A Kruger Rand has legal tender status just like a normal 1 Rand coin and in principal it is not permissible to exchange 1 Rand for more than 1 Rand. 

In Shari’ah, any coin which is majority gold (like a Krugerrand) will be in the ruling of a gold coin (dinar). The non-gold content is disregarded because even pure gold coins contain some alloy in order to prevent them from breaking apart. Therefore, when trading a Krugerrand for Rands, it is an exchange of fuloos (normal Rands) for a dinar (a Kruger Rand). There are three potential Shar’i issues when exchanging a Krugerrand for Rands; Riba (usury), Qabd (posession) and bay’ al kail bi’l kali (the sale of debt for debt).

1. 1.          The laws of Riba will not apply because there are two causes of Riba in such a transaction and neither apply. Firstly, the counter values are of different genera, thus there can be an excess on either side. Secondly, there is no unification of measure or weight, since a dinar (gold) is weighed, whereas fiat currencies (Rands) are counted.
2. 2.          The laws of Sarf (currency exchange) demand that whenever there is an exchange of gold for gold, silver for silver, or gold for silver, there must be a mutual exchange of both counter values. However, when exchanging a Krugerrand for Rands these laws will not apply, because both counter values are not gold or silver. Therefore, there is no need for mutual exchange of both counter values in such a transaction.
3. 3.          Whenever there is an exchange of money for money, one of the counter values needs to be handed over, in order to prevent what is termed in the hadith as a sale of debt for debt (bay’ul kali bi’l kali). However, even though a Krugerrand is considered legal tender, the element of Thamaniyyah (money) is absent because nobody considers it money, nor uses it as such. Moreover, it is clear that even the government intended for it to be a means of investment in gold, as opposed to money. It is therefore no different to a gold nugget or bullion. Accordingly, when buying or selling a Krugerrand, there is no need to physically handover either counter value (the Rands or the Krugerrand). One merely needs to specify which Krugerrand in particular one is buying or selling. 

And Allah Ta’āla Knows Best

Faizal Dhada     

Student, Darul Iftaa

UK      

Checked and Approved by,

Mufti Ebrahim Desai.