One of the biggest changes to interest rates in South Africa’s history coming this year
South Africa’s transition to ZARONIA is getting closer to reality and marks one of the largest structural shifts for the country’s capital markets.
Many South Africans may not know what JIBAR (the Johannesburg Interbank Average Rate) and ZARONIA (South African Rand Overnight Index Average) are.
The indices refer to the rates at which financial organisations, mainly banks, lend to one another. SA Home Loans is a rare example of a company that used JIBAR in pricing its products to retail customers.
Although not a common measure for retail banking customers, the shift from JIBAR to ZARONIA markets is a huge change for the financial markets.
JIBAR was based on survey estimates and was subject to manipulation. ZARONIA, on the other hand, is anchored on actual market transactions.
ZARONIA is thus seen as a more reliable and transparent risk-free reference rate (RFR), which is why the South African Reserve Bank (SARB) decided to move to the new reference rate.
The move aligns with global benchmark reform programmes that have already been completed or are underway in many markets.
Elenjical Solutions said that it simplifies hedging strategies and cross-border operations for institutions with international exposure.
It added that the transition also creates a practical impetus for modernisation, with institutions that adopt ZARONIA needing to update pricing models, contract systems and transaction processing systems.
A few months left
The shift to ZARONIA is currently underway, the JIBAR trades ceasing in May 2026, and full cessation is mandated by December
Elenjical said that some recent transactions signal that the transition has entered its decisive phase.
This includes RMB arranging South Africa’s first JSE-listed corporate bond linked to ZARONIA for Super Group Limited, giving the market its first live pricing reference for future issuances.
Standard Bank then became the first South African bank to issue Flac notes, raising over R2 billion, and the first to offer floating rate notes linked to ZARONIA in a public auction.
“These deals demonstrate that early movers are not simply complying — they are helping build the reference infrastructure the whole market will rely on,” says Alisha D’sa, Senior Consultant at Elenjical
“The Super Group transaction established a pricing reference that provides clarity and confidence as ZARONIA adoption accelerates.”
That said, operational and legal risks still remain regarding the transition. D’sa said that operational complexity should not be underestimated.
“The most pressing risk is disruption – the transition requires a complete overhaul of existing systems, renegotiation of legacy contracts and updates to pricing models across portfolios,” she said.
She added that financial instruments must ensure that systems can accurately price and capture ZARONIA-linked instruments.
Institutions will also need to work through the legal processes required to renegotiate contracts and embed robust fallback clauses.
“The scale of that contractual work means businesses that have not yet maintained pace will face mounting pressure in the months ahead,” said Elenjical.
“Regulatory alignment with SARB guidelines is non-negotiable. The clear December 2026 deadline for full JIBAR cessation leaves little room for delay in institutions still mid-transition.”
For those still in the transition, they will need to prioritise end-to-end testing of procedures and controls for ZARONIA-based instruments.
Institutions that have moved early have now accumulated practical experience with ZARONIA pricing and execution that latecomers will need to develop under greater time pressure.
Loading ...