The Johannesburg Interbank Average Rate (JIBAR), a key benchmark for South African banks, will be replaced by the South African Rand Overnight Index Average (ZARONIA) after the Market Practitioner’s Group adopted it as the new Alternative Reference Rate (ARR).

Jibar has been the standard for unsecured interbank lending, but it will be phased out by 2026.

As wholesale banking caters to large companies, typical consumers will likely not be directly affected.

This update comes in response to an announcement from RMB’s Kim Robertson who, in November of last year, confirmed the South African Reserve Bank’s mandate to instate Zaronia and that the rate, now endorsed, could be used by market participants.

Reliable rates: Zaronia's strength

To gain a clearer understanding of Zaronia, it is the interest rate at which banks borrow overnight rand funds, calculated from a selected average of real transactions.

Zaronia and Jibar differ primarily in how they are calculated and the role they play in financial markets. Jibar is based on predicted future rates, where a panel of selected banks submits indicative prices of what they expect the interest rate will be for lending unsecured funds over a certain period.

This method relies on expert judgement and projections, making Jibar a forward-looking benchmark. However, its reliability has been questioned because it is not grounded in actual market transactions.

On the other hand, Zaronia is calculated using historical data from real transactions. It reflects the interest rates that banks actually paid for overnight funding, making it more credible and robust.

Zaronia is based on actual, observable transactions, rather than estimates, which gives it more reliability compared to Jibar.

In 2025, Zaronia will be used to set interest rates in cash markets.

Preparing for Zaronia transition

Robertson advised corporations to anticipate being impacted if they hold a floating-rate loan, credit facility, deposit, derivative, or any financial contract with payments linked to Jibar (or other affected benchmarks) that mature after the cessation date of Jibar.

“Companies need to start learning about the Zaronia and how it will work for their transactions,” she said.

Robertson suggested firms review their transactions based on Jibar and other reference rates, consider the potential impact of the discontinuation of Jibar and other reference rates, and assess how the transition to an ARR may affect their business.

She added that RMB is assessing how the transition might impact Jibar-linked transactions and products while preparing to review and enhance its product offering.

“We are closely monitoring market developments during this process and benchmarking against the transitions of our global peers during our journey towards reference-rate reform."

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