The SARB has been engaging market participants on the need to reform local interest rate benchmarks. This is partly due to South Africa’s involvement in the efforts of the Financial Stability Board’s Official Sector Steering Group (OSSG) to strengthen critical interest rate benchmarks and promote adherence to international best practice. In addition, the case for reforming the Jibar, which is the most widely used reference rate in South Africa and is therefore of systemic importance, was informed by several concerns, including that:

• the Jibar is currently not underpinned by a large number of transactions, which is a desirable and essential characteristic of a benchmark interest rate, according to principles for financial benchmarks developed by the International Organization of Securities Commissions (IOSCO);
• market activity in three-month negotiable certificates of deposit (NCDs), which forms the basis of the most widely referenced three-month Jibar, has declined both in nominal terms and as a share of wholesale bank funding. Currently, three-month NCD volumes make up less than 5% of NCD issuance; and
• the current calculation methodology for the Jibar is vulnerable to potential manipulation.

The SARB is also cognisant of the role benchmarks play insofar as they serve as reference rates for a large number of financial contracts. This implies that they have a key role to play in the transmission of monetary policy decisions and the cost of (and remuneration of) capital in the broader economy.

The South African Reserve Bank (SARB) mandated the Market Practitioners Group (MPG) to establish an alternative reference rate to replace the Johannesburg Interbank Average Rate (Jibar) and facilitate a smooth transition. Jibar will cease on 31 December 2026.

The MPG is a joint public and private sector group that was established in 2018 to drive the reference rate reform programme in South Africa. It is chaired by the SARB and comprises official sector and industry representatives, including members of the savings industry, corporate treasuries and commercial banks.

The technical work of the MPG is carried out by seven workstreams, each with a focus on the different aspects of the programme. They are the:

• Transition Planning and Coordination Workstream
• Cash Market Workstream
• Governance and Regulatory Issues Workstream
• Communications Workstream
• Derivatives Workstream
• Legal Workstream
• Accounting and Tax Workstream

Initially, the MPG had two workstreams for establishing a suitable alternative risk-free rate and strengthen Jibar. These workstreams were dissolved after they had completed their work.

The MPG has endorsed the South African Rand Overnight Index Average (ZARONIA) as the successor rate to Jibar. ZARONIA is a measure of the interest rate that commercial banks pay for unsecured, rand-denominated overnight wholesale deposits. The SARB is the benchmark administrator responsible for calculating and publishing ZARONIA daily.

Jibar cessation refers to the event where the SARB discontinues this publication benchmark. The SARB has officially announced the Jibar cessation date as 31 December 2026. All outstanding Jibar-linked financial contracts must be transitioned to ZARONIA or any appropriate replacement benchmark before 1 January 2027.

ZARONIA is an appropriate replacement reference rate that can be used in most Jibar-linked financial contracts. There are a few cases where a forward-looking term rate, often referred to as Term ZARONIA, will be essential, including trade finance, mortgage-backed securities and retail home loans. Some retail products may be better served by simpler reference rates such as the SARB policy rate.

ZARONIA is an acronym for South African Rand Overnight Index Average. It is the MPG’s preferred successor rate to the Jibar. The rate is a measure of the interest rate at which rand-denominated overnight wholesale funds are obtained by banks in South Africa. The rate is based on unsecured overnight call deposits placed with commercial banks, which are classified as deposit-taking institutions in the Banks Act 94 of 1990.

The process of selecting ZARONIA as the preferred successor rate to the Jibar was guided by the recommendations made by the Risk-free Reference Rate Workstream to the MPG. These recommendations are contained in a position paper which outlined a number of considerations for the design of alternative reference rates. This work also acknowledged that the global approach to working towards developing risk-free rates recognises that risk-free does not necessarily mean the credit risk of trading participants is zero, but that it is as close to zero as possible (i.e. near risk-free). It further acknowledged circumstances that are specific to the South African financial markets, such as limitations to how secured markets operate in South Africa.

On each South African business day, ZARONIA is determined as a trimmed, volume-weighted mean of the central 80% of the distribution of interest rates paid on eligible unsecured overnight call deposits, rounded off to three decimal places.

The SARB is the administrator of ZARONIA and will produce and publish the rate in accordance with the terms specified in the ‘Draft statement of methodology and the policies governing the SARB-administered benchmarks’. This statement requires that the headline rate is published on the SARB website every South African business day at 10:00. In the event that an error is discovered after the publication of a benchmark rate at 10:00, and if such an error pertains to the calculation process or to the transaction data supplied to the SARB, the benchmark rate may be republished at any time before 12:00 South African time.

The use of SARB-administered benchmarks is free of charge. Therefore, it is not subject to a licence agreement between the user and the SARB, nor between the user and any agent to which the SARB may delegate some or all of its responsibilities pertaining to the determination of these benchmarks. In line with the publication policy, all SARB-administered benchmarks will be made available on the official website of the SARB at the stated times, as well as via the SARB online statistical query.

Market participants should assess their exposure to Jibar and develop a clear transition plan ahead of its cessation on 31 December 2026. Key actions include:

• identifying all contracts and products that reference Jibar and determining their materiality;
• reviewing contractual fallback provisions and addressing any gaps or uncertainties;
• assessing whether existing contracts require remediation or renegotiation to facilitate transition;
• evaluating the suitability of replacement rates, including ZARONIA, and understanding the economic and operational implications of transitioning;
• considering whether spread adjustments or other modifications are required to maintain the intended economics of existing contracts;
• assessing the impact of transition on hedging strategies, valuations, systems, processes and risk management frameworks; and
• reducing reliance on Jibar by ensuring that new contracts reference appropriate alternative rates where feasible.

The illustrations below provide details of the five-step approach to transition that the SARB has opted for. Essentially, this process entails strengthening the existing reference rate (Jibar) to ensure that it remains a credible reference rate until the transition to an alternative reference rate is complete. This is then followed by a conceptual process of designing a suite of benchmark rates from which a preferred successor rate is selected. This stage also includes the development of the benchmarks using historical data. Once the MPG makes its decisions about the preferred successor rate, the rate is then produced on a daily basis for observation – a process that leads to market adoption and, eventually, cessation of the existing (Jibar) reference rate.

Companies use several software packages (systems) to perform treasury and accounting functions. These systems, which are developed and maintained by well-known information technology solution providers, together with the systems used by stock exchanges, clearing houses and payment institutions, constitute the market infrastructure of the country. The transition to ZARONIA will require all relevant systems to be capable of processing, settling and maintaining transactions that reference ZARONIA and compounded ZARONIA period averages. Systems that are configured to accept forward-looking rates (such as Jibar) only, would need to be reconfigured for the Jibar transition. It is crucial that each firm assesses the readiness of its own systems and to plan for potential software package changes that may be required to ensure the timeous adoption of ZARONIA.

All infrastructures and processes that currently use Jibar should be assessed to see whether they can use an alternative near-risk free reference rate such as ZARONIA, which is fundamentally different from Jibar. These may include:

• trade booking infrastructure;
• risk management infrastructure and processes;
• settlements infrastructure;
• accounting infrastructure and processes;
• regulatory reporting; and
• market infrastructure providers.

‘No new Jibar’ refers to the joint directive from the SARB and the Financial Sector Conduct Authority (FSCA) requiring market participants to limit their Jibar exposure, effective from 1 May 2026. Market participants should not increase their exposure; instead, they should focus on reducing or hedging pre-milestone exposure. Special dispensations have been provided for trade finance, Jibar-linked retail home loans and their funding and qualifying Jibar-linked securitisations.

Jibar and ZARONIA differ in what they measure. ZARONIA reflects the average interest rate at which banks borrow rand overnight from other market participants and is considered a near risk-free rate. Jibar is a forward-looking term rate that includes a premium for credit and liquidity risk. Therefore, a ZARONIA-based replacement benchmark for Jibar would require that an adjustment spread to be applied to ZARONIA to account for the difference between the two benchmarks. This spread is referred to as the credit spread adjustment (CAS).

The CAS was determined using a five-year historical median spread methodology endorsed by the MPG, consistent with international benchmark reform practices. The SARB confirmed on 3 December 2025 that Jibar will be permanently discontinued following its final publication on 31 December 2026. From that date, all Jibar tenors will cease to be provided and will be deemed non-representative. As part of the transition framework, the Jibar-to-ZARONIA CAS values were fixed on 3 December 2025. The applicable credit spread adjustments for each Jibar tenor are shown in the table below:

Certain retail products, including home loans, contain contractual provisions that reference the prime rate as a fallback once Jibar becomes unavailable. However, Jibar and prime are fundamentally different rates. Jibar is a wholesale market benchmark, while prime is a commercial lending rate that reflects banks’ funding costs, credit risk considerations, operational costs and lending margins.

Consequently, a direct substitution of Jibar with prime could result in a material change to the economics of a contract. To address this, the MPG assessed an appropriate Jibar-prime CAS that can be applied where prime is used as a fallback rate.

Following industry analysis, the MPG supported a methodology broadly aligned with the Jibar-ZARONIA CAS framework, based on a five-year historical median spread methodology. The purpose of the adjustment is to preserve, as far as reasonably possible, the economic intent of existing contracts and provide consistency, transparency and operational certainty in the transition of affected products. The applicable CAS for prime is shown in the table below:

Fallback language refers to financial contract provisions that specify what actions should be taken when an applicable reference rate is discontinued or deemed unrepresentative. The provisions would often specify the fallback rate that must be used when certain trigger events have occurred. Without such contractual provisions or legislation, most financial contracts would need to be renegotiated or face litigation.

The MPG has developed a range of fallback approaches to support different market segments and products. These include the use of compounded ZARONIA plus a CAS, the development of a forward-looking Term ZARONIA benchmark for appropriate use cases and, where necessary, the temporary use of synthetic Jibar for certain legacy contracts. Product-specific transition notices and supporting legal documentation are also being developed through the MPG Legal Workstream to assist market participants in implementing consistent fallback arrangements. The objective is to provide contractual certainty, facilitate an orderly transition away from Jibar and reduce the risk of market disruption at cessation.

In October 2025, the SARB issued a request for proposals for the development of a forward‑looking ZARONIA term reference rate. The mandate was subsequently awarded to FTSE Russell. Following the receipt of formal correspondence confirming provisional endorsement, work is now underway to develop a prototype forward‑looking ZARONIA term rate. This phase focuses on methodology design, governance and operational readiness, with the intention of progressing towards a production‑ready rate once the necessary conditions and approval requirements are met. Until then, compounded ZARONIA remains the primary and available reference rate for market use, with the forward‑looking term rate under active development rather than currently published.

A compounded ZARONIA period average is a backward-looking term rate derived from past ZARONIA values, which are compounded daily to determine a geometric mean over a specific period. The SARB publishes compounded ZARONIA period averages for standard tenors, including one month, three months, six months, nine months and 12 months.

The calculation methodology for compounded ZARONIA averages is consistent with the International Swaps and Derivatives Association’s (ISDA) methodology used in overnight index swaps. The calculation method involves multiplying the sum of one plus the ZARONIA rate for each business day, adjusted for the number of calendar days it applies, minus one, across all business days within the interest period. This ensures that interest compounds exclusively on South African business days, with simple interest applying to non-business days at a rate equal to the ZARONIA value for the last available business day. Additionally, interest is computed based on the actual number of calendar days, assuming a 365-day year, in line with South African money market convention. The 30-, 90-, and 180-day ZARONIA averages employ daily compounding on each business day. On any day that is not a business day, simple interest applies, at a rate of interest equal to the ZARONIA value for the preceding business day.

The ZARONIA index measures the cumulative effect of compounding ZARONIA on a notional unit of investment over time, with the initial value set to 100.000000000000 on 1 November 2022, the first value date of ZARONIA. For subsequent days, the index is determined by multiplying the previous day’s index by the sum of one plus the ZARONIA rate for each business day, adjusted for the number of calendar days it applies, over the entire period. This adjustment accounts for variations in the number of days between business days, with Fridays typically having a count of three to include the weekend, along with adjustments for public holidays.

Market participants may use the published index values to determine the compounded ZARONIA period average rate that is applicable over their maturities of choice.

Derivatives and cash market conventions refer to the standard practices and protocols followed when trading financial instruments in these markets. The aim is to provide clear and consistent guidelines for calculating interest accruals and payments, facilitating efficient trading and supporting effective risk management.

Tough legacy contracts are existing Jibar-linked contracts that cannot be remediated successfully before Jibar is discontinued on 31 December 2026. These contracts may face legal, operational or other constraints that make it difficult to transition them to an alternative reference rate. Consequently, they will require a legislative solution, also referred to as safe harbour provisions, to transition them.

Safe harbour provisions are legislation and regulations that set out how a financial contract will be transitioned in the absence of fallback provisions. Generally, they empower the relevant authority to designate replacement benchmarks and protect the contractual parties and the benchmark administrator from litigation in the application of those provisions.

The SARB, in partnership with National Treasury and other relevant authorities, is pursuing amendments to the Financial Sector Regulation Act 9 of 2017 (FSR Act) to provide an appropriate legislative framework for these safe harbour provisions. The proposed amendments have received Cabinet approval, were certified by the State Law Adviser and introduced into Parliament. The amendments are currently progressing through the parliamentary process, including committee deliberations and legislative review, before they can be enacted into law.

Once enacted, the safe harbour framework is expected to support the orderly transition from Jibar to alternative reference rates, reduce the risk of disputes and litigation, provide certainty for tough legacy contracts and help safeguard financial stability during the benchmark reform process.

Synthetic Jibar is a forward-looking term rate designed to replicate the economic characteristics of Jibar. It is likely to be used to transition tough legacy contracts upon Jibar’s cessation. The SARB will likely designate synthetic Jibar as a temporary fallback mechanism for a narrowly defined set of tough legacy financial contracts that need a forward-looking term rate.

Importantly, synthetic Jibar must not be regarded as a continuation of Jibar as a representative market rate or a benchmark for new business. Instead, it should be thought of as a regulated, non‑representative rate designed to approximate Jibar’s economic characteristics, using a ZARONIA‑based framework combined with an appropriate credit adjustment.

Consistent with international benchmark reform practices, synthetic Jibar will apply only where contractual fallbacks do not already provide an effective transition to ZARONIA or another relevant benchmark rate. Contracts with robust fallback language will transition in accordance with their agreed terms and will not rely on synthetic Jibar. Its role and duration are very limited, aimed at enabling the orderly continuation and run‑off of truly tough legacy exposures.