Kamogelo Manyathela | Analyst | Corporate Finance | Tamela | mail me |
South Africa’s financial markets are entering a new era. The Johannesburg Interbank Average Rate (JIBAR), long the anchor of domestic funding and lending, will soon be replaced by the South African Rand Overnight Index Average (ZARONIA).
This transition is reshaping how interest rates are priced. It aims to create greater transparency, ensure stronger reliability and achieve closer alignment with global best practice.
Goodbye JIBAR, hello ZARONIA
Historically, JIBAR has been central to loan agreements, preference shares, bonds and structured products. However, it relies on indicative quotes from banks rather than actual trades. Because of that, it no longer meets international standards for robust and transparent benchmarks.
ZARONIA takes a different approach. It is calculated from actual overnight unsecured interbank lending transactions. This provides a transparent, transaction-based measure that reflects real market activity. For SA’s financial markets, this change signals a stronger foundation for consistent pricing and improved investor confidence.
The South African Reserve Bank (SARB) first published ZARONIA on 2 November 2022. Since then, the Market Practitioners Group (MPG) has developed a detailed transition plan. Key milestones include the launch of the “ZARONIA First” initiative for derivatives in April 2025. The plan also introduces fallback methodologies for JIBAR-linked contracts in both cash and derivatives markets. In addition, legal amendments will address “tough legacy” contracts that cannot easily transition.
Unpacking the transition
The transition will take place in several phases. A formal announcement of JIBAR’s cessation is expected in December 2025. This will be followed by an active transition period throughout 2026. Once the directive of “no new JIBAR transactions” takes effect, the rate will end. The cessation is expected by December 2026.
This phased approach will give institutions time to renegotiate contracts and update treasury and risk systems. It will also help them adjust their hedging strategies. Furthermore, it will ensure a smoother transition to the new benchmark. The process represents a structural milestone for SA’s financial markets. These markets are evolving toward higher standards of credibility and stronger global alignment.
A critical issue during this shift is contract fallback. In March 2025, the MPG confirmed that JIBAR fallback rates will use compounded ZARONIA plus a credit adjustment spread (CAS). This approach mirrors global ISDA conventions. Without such fallback provisions, contracts could face pricing uncertainty once JIBAR is no longer available.
Modernising regulatory and operational frameworks
Lawmakers are preparing legislative amendments to safeguard contracts that lack adequate fallback language. These steps are essential to maintain market integrity and legal certainty as the transition continues. The reforms also show how SA’s financial markets are modernising regulatory and operational frameworks to align with international norms.
This shift is more than a technical or regulatory update. It will influence corporate funding costs, covenant calculations, refinancing terms and capital strategies. Institutions that act early by adopting ZARONIA-linked instruments and restructuring exposures will reduce uncertainty. They will also gain an advantage as liquidity deepens in the new benchmark.
The fall of JIBAR and the rise of ZARONIA mark a defining transformation in South Africa’s financial architecture. It is not only the end of an era. It is also the beginning of a more transparent, resilient and internationally consistent future. As ZARONIA takes centre stage, South Africa’s financial markets are positioned to compete more confidently in the global capital landscape.
