ZARONIA

ZARONIA FAQs

What is a reference rate?

Market participants often use widely known interest rates to price, value and measure the performance of financial securities across various markets, including equity, credit, commodity, fixed income, and foreign exchange (FX) markets. These rates are commonly characterised as reference rates as they are often referenced in financial contracts. Some of these rates are determined solely by credible institutions, such as the policy rates of central banks, while others combine inputs from numerous contributions to form indices that are commonly referred to as benchmark rates. Essentially, reference rates tend to reflect wider market conditions, assist in price discovery, and reduce information asymmetry.

Certain benchmark rates are deemed critical as they underpin the pricing of a large volume of financial contracts worth trillions of rands and are used to measure the performance of large investment funds. Consequently, they are deeply embedded in the global financial system and play an important role in the functioning of modern financial markets. Examples of such critical benchmarks include the US dollar London Interbank Offered Rate (Libor) and the Johannesburg Interbank Average Rate (JIBAR), which are widely referenced in financial instruments within the South African financial market.

Why are benchmark interest rates being reformed?

The reform of key reference rates began in earnest after the Financial Stability Board's (FSB) review raised concerns about the integrity and reliability of certain interbank offered rates' (IBORs) benchmarks (report of the FSB review can be accessed via https://www.fsb.org/2014/07/r_140722/). It became evident that IBORs were susceptible to manipulation as their computation relied on the panel of contributing banks' indicative rates. Furthermore, it was questionable whether the IBORs were still representative of the interest that they purported to measure given the signifcant decline in the volumes of unsecured funding market activity that underpinned them. On the basis of these findings, a number of jurisdictions convened national working groups to review their respective IBORs. Most working groups recommend that the IBOR rates be discontinued and replaced with more robust risk-free or near risk-free rates. Some regulatory authorities went a step further, such as the United Kingdom's Financial Conduct Authority, which announced that it would no longer compel panel banks to continue their Libor submissions after December 2021, effectively heralding the end of the Libor.

This included the United Kingdom, United States, Europe, Canada, Japan and Switzerland.

Why is the JIBAR being reformed?

The SARB has been engaging market participants on the need to reform local interest rate benchmarks. This 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 additional, 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 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 wholesome 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.

How is ZARONIA different to JIBAR?

ZARONIA	JIBAR
Near risk-free rate (no implied Bank credit risk)	Built in credit and term premium component
Overnight rate	Term rate
Backward looking	Forward looking
Fully transaction based	Indicative rates
Broad array of market participants	Only five contributing banks


JIBAR (Johannesburg Interbank Average Rate) has been South Africa’s term reference rate, reflecting forward-looking panel bank submissions across the following tenors; 1‑, 3‑, 6-, 9- and 12‑months, but with limited transaction backing. ZARONIA (South African Rand Overnight Index Average) is the new overnight benchmark, calculated from actual overnight transactions in the unsecured funding market. It is more robust, transparent, and near risk‑free, making it the preferred successor to JIBAR for pricing loans, bonds, and derivatives.

 

What is ZARONIA?

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.

Who administers and produces ZARONIA?

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.

What is market infrastructure readiness?

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 or 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.

What does JIBAR cessation mean?

The cessation of the JIBAR refers to the situation where the benchmark will no longer be published past a certain date. This will mean that all contracts referencing the Jibar will need to be actively transitioned to an alternative reference rate and/or make provision for the use of an appropriate fallback rate. New contracts entered into after the announcement of the cessation date and which mature after the cessation date will need to reference an alternative rate, preferably the designated successor rate.

What is the MPG?

The Market Practitioners Group (MPG) is a joint public and private sector group that was estabilished by the SARB in 2018 to drive the reference rate reform programme in South Africa. The MPG is chaired by the deputy governor of the SARB response for financial markets and is organised in such a way that it comprises users of reference rates from different pockets of the market, including members of the savings industry, corporate treasuries, the banking sector and the official sector.

The MPG established workstreams, each with a focus on the different aspects of the programme, with the responsibility to execute the mandate of the MPG. There are currently seven work streams, namely:

• Transition Planning Workstream;
• Data Collection and Infrastructure Workstream;
• Governance Workstream;
• Communications Workstream;
• Derivatives Workstream;
• Legal Workstream; and
• Accounting and Tax Workstream.

Two workstreams that were established have since been dissolved after completing their tasks. These are:

• Unsecured Reference Rate Workstream, which was tasked with the responsibility of making recommendations to the MPG regarding the choice and design of unsecured reference rates and a credible interim process for strengthening the Jibar while an alternative reference rate was being developed; and
• Risk-Free Reference Rate Workstream, which was mandated with making final recommendations to the MPG regarding the choice and design of suitable near risk-free interest rate benchmarks.

The terms of reference of each workstream are defined in the MPG Workstreams terms of reference which can be accessed here. The terms of reference of the MPG can be accessed here.

What is the ZARONIA rate today?

The current ZARONIA rate is published daily by the South African Reserve Bank and reflects the actual overnight rand funding market. You can view the latest rate and historical data directly on the SARB website here.

When did the SARB transition from JIBAR to ZARONIA?

The transition from JIBAR to ZARONIA has been phased over several years. ZARONIA began publishing daily in late 2022, with market participants gradually adopting it through observation periods in 2023. The formal cessation of JIBAR is scheduled for 31 December 2026, after which ZARONIA will fully replace it as South Africa’s key benchmark rate.

How is ZARONIA calculated?

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.

What is the purpose of the published Credit Adjustment Spread (CAS)?

The primary purpose of a credit adjustment is to preserve economic neutrality during the transition from one interest rate benchmark (like JIBAR) to another (like ZARONIA). It is a static adjustment which is added to the new benchmark to minimise unintended economic value transfer between a lender and the borrower after transitioning.

The methodology recommended by the SARB MPG to calculate CAS aligns to the ISDA (international Swaps and Derivatives Association) fallback methodology which is the median of the five-year historical difference between ZARONIA and JIBAR. The CAS has been fixed as of 03 December 2025. following the official announcement that JIBAR will be discontinued from 31 December 2026.
 

ZARONIA CAS (%) per tenor
1M	0.11420
3M	0.16190
6M	0.43230
9M	0.58300
1Y	0.74100

Disclaimer

This calculator, provided by Investec Bank Limited (“Investec”), is intended for use by the user only and is not directed at you if Investec is prohibited or restricted by any legislation or regulation in any jurisdiction from making it available to you. In particular, the calculations generated are indicative and for educational purposes only and by using this calculator, the user assumes full responsibility for any risk related thereto.

Further to the above, this calculator and nothing related thereto constitutes advice in any form, including but not limited to investment, accounting, tax, legal or regulatory advice and therefore has no regard to the specific investment objectives, financial situation or particular needs of any specific recipient. No representation is made that any calculation from using this calculator is accurate or complete or that any returns indicated will be achieved. Prices and availability are indicative only and are subject to change without notice. Changes to assumptions may have a material impact on any calculations and/or returns.

THIS ELECTRONIC TRANSMISSION MAY NOT BE FORWARDED OR DISTRIBUTED TO ANY OTHER PERSON AND MAY NOT BE REPRODUCED IN ANY MANNER WHATSOEVER. ANY FORWARDING, REDISTRIBUTION OR REPRODUCTION OF THIS ELECTRONIC TRANSMISSION IN WHOLE OR IN PART IS UNAUTHORISED. FAILURE TO COMPLY WITH THIS DIRECTIVE MAY RESULT IN A VIOLATION OF APPLICABLE LAWS AND REGULATIONS.

ANY LIABILITY OF WHATSOEVER NATURE AND HOWSOEVER ARISING ON THE PART OF INVESTEC, ITS DIRECTORS, EMPLOYEES, OR AGENTS, IS EXPRESSLY DISCLAIMED.