South Africa’s key benchmark interest rate, the Johannesburg Interbank Average Rate (JIBAR), will expire in 2025 and be replaced by a new index, promising a significant improvement in the calculation of interest rates in the country.

The South African Reserve Bank (SARB) has completed the observation period for the South African Rand Overnight Index Average (ZARONIA).

JIBAR, the key benchmark interest rate in South Africa, has a significant influence on the pricing and valuation of financial products.

It represents banks’ cost of borrowing for maturities of up to 12 months and is widely used in financial contracts, with outstanding contracts referencing the three-month Jibar exceeding R340.6 trillion.

These contracts include derivatives like interest rate swaps, bonds, and loans used by financial institutions and large corporate treasuries.

In comparison, ZARONIA is not subject to the same issues because it is calculated using actual overnight transactions in the wholesale funds market, making it a more reliable reference rate.

By reflecting the real cost of borrowing on an overnight basis, ZARONIA offers a stable and transparent measure that aligns with international standards for risk-free rates.

This means that from now on, ZARONIA will be the recommended alternative reference rate for ZAR-denominated financial contracts.

Source: TRADE FINANCE