RISK MANAGEMENT | 25 March 2024

Benchmark Reform:


South Africa’s financial realm is undergoing a significant shift from the Johannesburg Interbank Average Rate (JIBAR) to the South African Overnight Index Average (ZARONIA).

This transition is part of a broader global initiative to reform benchmark rates, echoing the recent phasing out of other Interbank Offered Rates (IBOR) such as the London Interbank Offered Rate (LIBOR) and the Euro Overnight Index Average (EONIA).

What is Benchmark Reform and why is it needed?

Benchmark Reform is a global initiative to enhance the stability and reliability of benchmark rates that underpin financial transactions. The initiative is aimed at improving the transparency and strengthening the credibility of existing benchmarks, such as the JIBAR (and the other phased-out IBOR that were replaced with various risk-free overnight indices), to ensure a more robust and trustworthy financial system.

How is JIBAR different to ZARONIA?

The key difference lies in the foundations of their calculation methodologies. The JIBAR is forward-looking and relies on submissions of indicative pricing from a selected panel of banks. In contrast, the ZARONIA is backward-looking and reflects actual observable transactions, which is why it is considered more credible and robust.

A summary of the key differences between the JIBAR and ZARONIA is shown below:

  1. Credit premium: the difference in yield between default-free obligations (e.g. government bonds), and securities issued by entities subject to credit risk, usually stated in terms of basis points
  2. Reference: the direction of time that the applicable rate is based on (e.g. forward-looking rates are expected rates, backward looking rates are actual rates)
  3. Reference period: the time period over which the term/tenor is applied to calculate the applicable rate

The role of the SARB and the MPG

The South African Reserve Bank (SARB) together with the Market Practitioners Group (MPG) play a pivotal role in driving the transition from the JIBAR to the ZARONIA, to ensure the financial system’s stability. The MPG is a joint public and private sector body composed of the SARB, the Financial Sector Conduct Authority (FSCA) and senior professionals from various financial market groups that are active in the domestic money market. The MPG is collaborating to facilitate a smooth transition by providing guidance and support to market participants throughout the process. As of 3 November 2023, the SARB has endorsed the use of the ZARONIA for trading, as per the MPG’s proposal.

What to look out for

Key dates and milestones are yet to be finalised by the SARB. However, draft timelines are available on the SARB’s website (as shown below). As the industry aims to adopt the ZARONIA, announcements will be expected from financial institutions, regulatory bodies and the MPG outlining crucial steps and guidance to market participants.

Source: MPG Conference slides, 19 April 2023 https://www.resbank.co.za/content/dam/sarb/what-we-do/financial-markets/mpg/mpg/mpg-events/Transition%20plan%20MPG%20April%202023.pdf

Where to find out more

For more information on the transition and related announcements, follow the links below to the SARB website:

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