Term ZARONIA: South Africa's Forward-looking Answer To JIBAR's Farewell

After years of deliberation, the Market Practitioners Group (the “MPG”) has formally endorsed the development of a South African Rand Overnight Index Average term rate (“Term ZARONIA”). This follows long-standing demand among market participants for a forward-looking reference rate capable of offering the same certainty as the Johannesburg Interbank Average Rate (“JIBAR”), which is soon to be permanently discontinued. The MPG's endorsement is, however, conditional upon the development of sufficient liquidity in the South African Rand Overnight Index Average (“ZARONIA”) derivatives market.

Why Term ZARONIA?

While ZARONIA provides a robust foundation for addressing the well-documented shortcomings of interbank offered rates, the practical realities of cash-flow management and treasury planning continue to drive demand for a forward-looking term rate. Term ZARONIA is accordingly designed to reconcile these considerations, combining the integrity of a transaction-based overnight rate with the predictability afforded by a term structure.

ZARONIA is inherently backward-looking, in that it can only be determined in arrears once overnight observations have been compounded over the relevant interest period. Term ZARONIA addresses this limitation directly. As a forward-looking rate fixed at the outset of each interest period, it enables parties to determine their payment obligations with certainty from the start, thereby facilitating more effective liquidity planning and cash-flow forecasting throughout the life of a transaction.

Proposed use cases

The MPG has emphasised that Term ZARONIA is not designed to serve as a like-for-like replacement for JIBAR but is rather intended for limited use cases only. The key principle is that Term ZARONIA should only be adopted where the use of ZARONIA would be operationally impracticable or commercially inappropriate. The MPG has specifically advised that the use of Term ZARONIA should be limited as follows:

Loan market:

1. retail loan activity referencing JIBAR;
2. commercial property finance referencing JIBAR;
3. securitisations that hold underlying loans which have transitioned from JIBAR to Term ZARONIA, and where the securitisation vehicle must reference Term ZARONIA at the note level to maintain alignment with its underlying asset pool and avoid basis mismatches; and
4. supply chain finance/invoice discounting, working capital loans, letter of credit discounting or financing, receivables discounting, trade loans between banks, and fixed-term working capital loans where transitioning from JIBAR to an overnight rate is proving to be difficult.

Derivative market

End-user facing derivatives intended to hedge cash products that have transitioned from JIBAR to Term ZARONIA, where the derivative must reference Term ZARONIA to ensure hedge effectiveness and avoid basis risk between the hedged exposure and the hedging instrument.

Accordingly, other than for the above-specified use cases, the use of Term ZARONIA will not be supported.

FTSE Russell's appointment as administrator

Following a request for proposal issued in October 2025, the MPG selected FTSE Russell, a subsidiary of the London Stock Exchange Group (“LSEG”), to serve as the administrator of Term ZARONIA. FTSE Russell brings considerable experience in this domain, having administered a wide range of interest rate benchmarks across EMEA, APAC, and the Americas, including FTSE Term SONIA, FTSE Term €STR, and SAIBOR. Notably, FTSE Russell also has an established presence in South Africa through its partnership with the Johannesburg Stock Exchange, which dates back to 2002.

Proposed methodology

FTSE Russell proposes to calculate Term ZARONIA using a three-level waterfall applied individually to each tenor as follows:

• Level 1: derives the rate from spot-starting ZARONIA overnight index swap (“OIS”) transactions cleared through LCH Group (“LCH”), incorporating dealer-to-client quotes captured at 30-minute intervals from Tradeweb together with executed trades sourced from LCH during a 09:00–18:00 SAST collection window on the preceding business day. A trimmed mean is then applied after removing outliers.
• Level 2: applies if Level 1 data is insufficient and draws on indicative rates obtained from:
  • (i) interdealer brokers (Tradition, GFI, and Latium Capital);
  • (ii) Fenics Data & Analytics; and
  • (iii) Tradeweb ZARONIA OIS composite rates. A lookback period of up to four business days is applied in respect of stale sources.
• Integrated Fallback: applies if neither the Level 1 nor the Level 2 data sufficiency thresholds are met. Under this approach, the spread between the previous day's Term ZARONIA rate and overnight ZARONIA compounded to the previous business day is added to ZARONIA compounded to the determination date. This mirrors the approach used for FTSE Term SONIA and FTSE Term €STR.

FTSE Russell issued in April 2026 setting out the proposed methodology described above, with the deadline for responses falling on 5 June 2026. A prototype rate across 1-month, 3-month, 6-month and 12-month tenors is expected to be made available from around June 2026 for testing purposes. Following the consultation, FTSE Russell intends to publish an outcome statement and to update the methodology as appropriate in light of feedback received. The production benchmark is targeted for launch before year-end 2026, subject to the presence of sufficient underlying market liquidity. Once live, the rate will be published at approximately 10:30 SAST on each business day via LSEG Data & Analytics products (including Workspace) and the FTSE Russell website.

Conclusion

Term ZARONIA represents a pivotal development in South Africa's benchmark reform journey. With JIBAR set to permanently cease at year-end 2026, the successful development and adoption of a robust, forward-looking term rate is essential to ensure continuity and confidence in the South African money markets.

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