From JIBAR to ZARONIA. Embracing a new era in South African financial benchmarking Try the ZARONIA calculator Absa | Corporate and Investment Banking > Insights and Events > Zaronia 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). To view the ZARONIA transition timelines specific to the South African market, please click here. 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 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. The International Organization of Securities Commissions (IOSCO) have specified principles that allow for greater confidence in setting rates. "Risk free" rates have been identified as alternative rates. LIBOR and JIBAR were identified as non-compliant with IOSCO principles. The LIBOR transition to "risk free" rates has since been concluded. South Africa is now preparing for the same reform coordinated through the SARB's establishment of a Market Practitioners' Group (MPG). JIBAR is expected to cease December 2026 and will be replaced with ZARONIA. What is the Absa ZARONIA calculator The ZARONIA calculator computes interest and interest payments for ZARONIA-linked financial products, for both single and multi-period instruments. What products can the calculator be used for? The calculator applies conventions for loans, money market funds, bonds and derivatives as endorsed by the SARB, but also allows for some flexibility. 1. Although conventions have been endorsed by the SARB, they are not prescriptive. What should the calculator be used for? By leveraging our deep regional knowledge – and our advisory, financing and capital raising expertise – our award-winning global team will tailor an ideal solution for your needs. Absa's ZARONIA calculator The Absa ZARONIA calculator is available for use here. For detailed information on the construction of the ZARONIA rate and its distinctions from JIBAR, please click here to access more comprehensive insights. Try the ZARONIA calculator Meet our team Ajay Bhowan Head of Treasury Execution Services (& Absa Bank Treasurer) Kumeshen Naidoo Head: Debt Capital Markets Ben Wiese Head Client Value Management Nonhlanhla Zwane Head: CIB Legal Investment Banking Division Frequently Asked Questions What is the difference between JIBAR and ZARONIA? Expand JIBAR is a known at the start of the interest period and is determined by 5 contributing banks. The next interest payment due or settlement is fixed in advance. The rate embeds a credit spread (counterparty credit risk) and is available in terms 1M, 3M, 6M, 12M. ZARONIA is an overnight average of fixed rates calculated from daily overnight observations of unsecured deposits. The next interest payments due or settlement is only known at the end of the loan period. The rate is “near-risk free” and does not include a credit or liquidity premium. There are currently no term rates for ZARONIA, however the MPG are in the process of investigating the use of a term rate and are targeting November 2024 to reach a conclusion and to provide recommendations. What is the difference between overnight and term rates? Expand The ZARONIA overnight rate resets daily and is based on overnight wholesale funds in South Africa. Term rates are generally fixed for a specific tenor (e.g., 1M, 3M, 6M, 12M), therefore, these rates are fixed upfront on the reset date. When will JIBAR cease? Expand The SARB (which is the administrator of the benchmark), through the Market Practitioners Group’s Transition Planning and Coordination workstream indicate December 2026. The exact cessation date for JIBAR is yet to be confirmed by the SARB. Absa will keep clients informed when this date is communicated. When do I need to stop doing JIBAR deals? Expand The hard deadline is yet to be formally communicated. Initial communication from the SARB suggests that from March 2026, no new JIBAR deals will be allowed to be originated. In choosing an internal deadline for stopping JIBAR deals, you should consider the operating environment which must be enabled to deal with ZARONIA. You should also consider market developments, particularly the liquidity in the underlying rates. What happens if my contract matures after cessation? Expand In this event, Absa will contact you to amend the document and replace the JIBAR rate with an agreed suitable alternative reference rate (likely ZARONIA). If applicable, an appropriate adjustment margin will be made to cater for the differences between the old rate and the new alternative rate such that the contract remains economically equivalent. Can I use ZARONIA? Expand Absa is preparing itself to transact products linked to ZARONIA. Currently, ZARONIA is available for all linear derivatives and unlisted Money Market instruments. There is a dependency on industry bodies such as the Loan Markets Association (LMA) and International Swaps and Derivatives Association (ISDA), amongst others to converge on appropriate fallback options for when JIBAR ceases. As new information becomes available, Absa will advise you on your options. Can I still do JIBAR deals? If so, is there anything I need to be aware of? Expand Yes, you can still do JIBAR linked deals. The amended legal agreement will have fallback language embedded to deal with the scenario of the rate ceasing to exist. What is Fallback language? Expand Fallback language refers to the contractual provisions that lay out the process through which a replacement rate can be identified if a benchmark (e.g. JIBAR) becomes unavailable. What will happen if my contracts do not contain fallback language when JIBAR ceases? Expand It is important that financial contracts include adequate and robust fallback language to address the cessation of JIBAR. A lack of adequate fallback language may result in the contract referencing the last published JIBAR (effectively converting to a fixed rate deal). Is there an option to move to another rate other than ZARONIA? Expand Absa offers a range of alternative rates to clients. You are encouraged to discuss options available with the Absa representative and to seek independent advice on understanding what rates are most appropriate for your profile Is there a forward-looking term rate similar to JIBAR? Expand To date no recommendations have been made on the development of a forward-looking term rate. It may take some time before a viable term-rate is provided to the market. Absa is monitoring developments from the SARB on the developments of term-rates.
