ZARONIA takes over
JIBAR’s days are numbered. By 2026, South Africa’s financial institutions must adopt ZARONIA, a shift that will fundamentally reshape how benchmark interest rates are determined in South Africa. Walter Böhmer, Principal Consultant at Elenjical Solutions, has been leading this transition at one of the leading African banks for 18 months. This is the inside story of one of the most significant financial reforms in South Africa
For decades, JIBAR has been the benchmark interest rate of South Africa’s financial system, used to price everything from loans to derivatives. But it is flawed. Like LIBOR before it, JIBAR is based on quotes from traders rather than real transactions. That makes it vulnerable to manipulation. Global regulators have been dismantling such systems for years, and now it is South Africa’s turn. Enter ZARONIA, a benchmark derived from actual overnight transactions — more transparent, more reliable, and, as of the end of 2026, non-negotiable.
Rewriting the rules
Switching from JIBAR to ZARONIA is no simple swap. “This isn’t just a technical adjustment,” says Walter Böhmer, Principal Consultant at Elenjical Solutions. “It’s a complete overhaul of how financial institutions calculate, manage, and book interest-bearing instruments.” The shift from a forward-looking rate to a backward-looking, compounded one requires financial models to be reengineered. Risk management frameworks need to be adjusted. IT systems must be updated or reconfigured. And at every step, liquidity challenges lurk.
The impact on trading desks has been significant. “Traders are used to managing their portfolios based on fixed term interest rates,” Böhmer explains. “ZARONIA doesn’t work that way — it’s based on compounded overnight rates – real market data that firms only see in retrospect.” That means a fundamental shift in how banks approach pricing, hedging, and portfolio valuation.
The roadblocks
Though the industry had braced for it, the Elenjical Solutions team observed significant challenges during the transition. One unexpected issue? Market divergence from expected spreads. “In the case of LIBOR and international alternative reference rates, the market drifted away from the published ISDA fallback spread,” says Böhmer. “As a result, rates did not adjust uniformly, leading to discrepancies that required ongoing monitoring.”
Beyond technical hurdles, liquidity remains a concern. As JIBAR-linked instruments are phased out, market depth will shift, potentially leading to short-term disruptions in pricing and execution.
Additionally, operational complexity has proven a major challenge. Many legacy systems were not designed for compounded overnight rates, requiring extensive reconfiguration of trade valuation models, booking processes, and risk reporting frameworks. “Firms that underestimate the scale of this transition risk increased volatility and pricing mismatches,” Böhmer notes.
The lessons are clear
For the wider industry, the lessons are clear: firms that approach this transition proactively — by integrating robust risk models, retraining teams, and upgrading legacy systems — will be best positioned for the post-JIBAR era. “We’ve seen that those who prepare early avoid costly last-minute adjustments,” Böhmer notes. “The transition isn’t just about compliance — it’s about future-proofing your business.”
With the 2026 deadline fast approaching, South Africa’s financial sector is at a turning point. Lessons from similar transitions in the US and Europe suggest that early adoption is key. “Firms that delay this process risk major disruptions,” warns Böhmer. “JIBAR will be gone. The time to prepare is now.” For South Africa’s banks, corporates, and investors, ZARONIA is a new way of doing business. The financial system is being rewired. Those who fail to adapt will be left behind.
Article originally published in Business Brief Printed April Edition