Introduction
There have been extensive discussions and presentations on the conversion of JIBAR as the base rate for corporate lending to ZARONIA. The focus on ZARONIA’s impact has increased as the SARB moves towards announcing the “No New JIBAR” directive, expected to be in March 2026.
Bastion and our clients in the interest rate hedging market are particularly interested in understanding how the transition will affect existing interest rate hedges, as well as the potential for new hedges referencing ZARONIA instead of JIBAR, which remains the current benchmark rate.
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Background
Bastion Advisory has tracked the transition from JIBAR to ZARONIA since 2019, following updates from the SARB’s Market Practitioners Group (”MPG”) and the readiness of local banks. The SARB’s latest update (15 August 2025) outlined milestones in the transition (see Figure 1), including the upcoming “No New JIBAR Transaction” date and the eventual cessation of JIBAR, both crucial for how liquidity in ZARONIA develops.
Like LIBOR used to, JIBAR currently underpins a wide range of financial instruments. Regulators around the world were concerned that bid-offer rates were open to manipulation and therefore favour benchmark rates that reflect actual market transactions. As such, regulators have shifted, or are shifting, to transaction-based Risk-Free Rates such as SOFR (US), SONIA (UK), and now ZARONIA (SA), which offer greater transparency, robustness, and alignment with global standards. A Risk-Free Rate (RFR) is defined as a rate of return on an investment that has zero risk of financial loss.
For South Africa, the shift to ZARONIA aims to create a more resilient base for pricing, hedging, and risk management. While ZARONIA activity (pre-transition) is initially focussed on the unsecured overnight market, the financial sector is actively developing ZARONIA-based cash and derivative markets.
The MPG is currently considering term ZARONIA rates, a key factor for hedging. During this pre-transition phase, market participants are asking how the ZAR swap market will develop and what lessons can be drawn from the U.S. and U.K.
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What is in store for South Africa and ZARONIA?
The transitions from LIBOR in the US and the UK provide a clear reference point for South Africa’s forthcoming shift from JIBAR to ZARONIA. Both jurisdictions introduced “synthetic” LIBOR as a temporary mechanism for legacy contracts that could not be converted immediately. These synthetic rates were constructed from the new Risk-Free Rates plus an historical Credit Adjustment Spread (CAS), giving markets time to adapt without requiring an immediate overhaul. Figure 2 below illustrates the timelines for each jurisdiction, covering the introduction and withdrawal of synthetic LIBOR:
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Based on these above timelines, we can observe in Table 1 below that in both cases the synthetic LIBOR allowed existing swaps to continue resetting acting as a buffer, maintaining continuity for legacy contracts while promoting a transition to the new risk-free rates.
The UK adopted a longer phase for quoting synthetic LIBOR compared to the US, which opted for a shorter, more compressed window aligned with its final cessation date. Overall, the availability of synthetic LIBOR for one to two years allowed institutions sufficient time to complete the transition without major disruption. The following table outlines these timelines.
| Country | No New LIBOR Date | Synthetic LIBOR Start | Final Synthetic Cessation | No New to Final Cessation Duration | Synthetic Duration |
|---|---|---|---|---|---|
| UK | Dec 31, 2021 | Jan 1, 2022 | Mar 28, 2024 | 2 years, 3 months | 2 years, 3 months |
| US | Dec 31, 2021 | Jul 1, 2023 | Sep 30, 2024 | 2 years, 9 months | 1 year, 3 months |
South Africa is expected to follow a similar path. For existing interest rate swaps, there will not be an immediate conversion to ZARONIA referenced swaps. A synthetic JIBAR is anticipated to be introduced to manage legacy contracts with an all-in window from “No New JIBAR” to “end of synthetic JIBAR” of roughly three years. The calculation of synthetic JIBAR rates will likely mirror the approaches taken in the UK and US, using ZARONIA plus a CAS. In the US and UK, the CAS was based on the historical median spread between JIBAR and ZARONIA over a c. five-year lookback period.
As a result of this analysis, we are able to predict the possible trajectory of the overall JIBAR to ZARONIA conversion for South African Banks, Institutions and Corporations as follows:
As in the UK and US, the South African market will also need time to gradually build ZARONIA liquidity and develop forward curves. Trading activity is expected to concentrate first in shorter-term swap tenors (c.1–3 years), while longer-dated hedges (c.5–10 years) are likely to take longer to gain traction. This implies that the forward curve may not be fully developed by the JIBAR cessation date, and companies may need to rely on synthetic JIBAR until liquidity in the new curve improves significantly.
In order to assist banks, institutions and corporates prepare for ZARONIA interest rate hedges the SARB published the “Historical estimation of the ZARONIA OIS curve” on 10 Oct 2025. This paper, prepared by the Derivatives Workstream, outlines the methodology and results for estimating the historical ZARONIA Overnight Indexed Swap (OIS) curve. It uses historical interest rate data to construct a ZARONIA-based swap curve and is provided as a practical resource to support market participants’ modelling and risk-management needs. This includes an estimation of the credit adjustment spread.
Finally, from a rate perspective as seen in Graph 1 below, ZARONIA, as an overnight risk-free rate, currently trades below the South African Repo rate, much like SOFR and SONIA relative to their respective policy rates. The current South African spread is c. 15 bps lower, reflecting its near risk-free unsecured nature. However, its predecessor, JIBAR, typically trades above the repo rate, reflecting embedded credit and term risk premia, as well as a built-in three-month market view.
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Best Practices for JIBAR to ZARONIA transition
When making the transition, our core recommendations to ensure a smooth and orderly move from JIBAR to ZARONIA are organised into three key areas: Legal, Operational, and Strategic:
- Legal & Documentation
- Update Fallback Language: Ensure all contracts that reference JIBAR contain robust fallback clauses that point to ZARONIA’s recommended compounded in arrears methodology.
- Avoid Mismatches: Proactively renegotiate and synchronise the documentation for your loans and any corresponding hedging instruments (like IRSs). This prevents hedge failure and mitigates the risk of financial loss from misaligned calculations.
- Operational and Technological Readiness
- Recalibrate Models: Update your cash flow forecasting, valuation, and risk models to handle the change in interest payments.
- Prepare your teams: Ensure that your Asset Management team and all other departments affected by the transition are fully briefed on ZARONIA and understand how it will impact the company.
- Strategic Engagement
- Engage Early and Leverage Resources: Begin discussions with your counterparties and advisors now. While there is no need to be overly concerned about the transition at this stage, staying in contact with Bastion Advisory, utilising the transition support tools and market practice guides provided by banks and the SARB can provide valuable guidance and help prevent any internal issues during the transition.
- Stay Informed: Keep engaged with communications from the MPG to anticipate evolving best practices and regulatory updates.
Conclusion
To understand the impact of the JIBAR to ZARONIA transition on the interest rate swap market, and by implication on Bastion’s corporate clients’ swap positions, we conducted a desktop analysis of the transition in the US and UK markets.
If we apply the timing of the LIBOR cessation date to the date when LIBOR swaps were no longer offered and existing swaps needed to be converted to SOFR and SONIA we get a period of about 3yrs post the no new JIBAR date which is expected for March 2026.
As a result, this gives our clients, who are typically large corporate lenders, a significant amount of time to observe the development and liquidity in the new ZARONIA interest rate swap market before having to make any significant decisions.
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For more information, please reach out to:
| Craig Williamson: | craig@bastionadvisory.co.za | 082-566-3463 |
| Jayson Dunne: | Jayson@bastionadvisory.co.za | 082-900-1561 |
| Jacques Mol: | Jacques@bastionadvisory.co.za | 082-496-4451 |
| Bastion Landline: | 010-541-0409 |
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References/Sources
SARB Published: Jibar Transition Plan – milestones update (August 2025). Available at:
Jibar Transition Plan – milestones update (August 2025)
SARB Published: Historical estimation of the ZARONIA OIS curve. Available at:
Historical estimation of the ZARONIA OIS curve
Better the Devil you know? The transition from LIBOR to SONIA. Available at: