Curbing the Legacy Problem: How businesses should act now on JIBAR cessation

In light of this timeline, the SARB continues to encourage market participants to transition contracts to its successor rate, the South African Overnight Index Average ("ZARONIA"). This follows a global initiative to enhance the stability, representation and reliability of benchmark rates that underpin financial transactions, which began with the transition away from the London Interbank Offered Rate ("LIBOR") in European markets.

At a high level, this reform reflects a shift away from benchmarks grounded in forward-looking estimates towards backward-looking rates informed by actual overnight transactions. The objective is to bolster robustness by widening the underlying data pool and reducing susceptibility to manipulation. In line with international transition trends, the distinction between JIBAR and ZARONIA is fundamental. Whereas JIBAR historically operated as a forward-looking term rate derived from indicative interbank funding quotes, ZARONIA operates as an overnight, backward-looking benchmark grounded in observable market activity. ZARONIA reflects actual funding conditions from the previous day, offering a more transparent and auditable reference rate. It is calculated using a volume-weighted methodology based on completed, unsecured overnight wholesale funding transactions above ZAR 20 million, drawing on a significantly deeper daily transaction pool (reported to be in excess of ZAR 460 billion).

In spite of us entering the last year of the adoption phase, the SARB has noted that regulatory monitoring as at the end of 2025 had not yet shown a material reduction in JIBAR-linked exposures, with the market still carrying approximately ZAR 45 trillion of exposure in the preceding year. Experience from the LIBOR transition demonstrated that late engagement led to congested amendment processes, increased advisory costs and strained counterparty relationships. Crucially, because ZARONIA is not a term rate, it cannot simply be substituted mechanically for JIBAR.

Bringing in the bystander – the role of Market Participants

The clear message is that proactive transition planning is no longer optional and early action will materially improve outcomes. As outlined above, ZARONIA is underpinned by actual unsecured wholesale funding transactions, many of which involve commercial banks, development finance institutions, large corporates, state-owned entities and asset managers. South African corporates are therefore not merely users of the benchmark, but contributors to the transaction pool that determines it. Against this backdrop, the focus must now shift from understanding what ZARONIA is to how it will be operationalised within organizations

In practical terms, companies should now be considering the following steps:

1. Cease originating new JIBAR exposure
   Where possible, avoid insisting on new JIBAR-linked instruments, even ahead of JIBAR Cessation. From March 2026, any new loan, bond, or derivative that still references JIBAR will be a commercially awkward contribution to the legacy problem.
2. Educate internal stakeholders early
   Ensure treasury, finance, legal, risk and senior management teams within your organisation understand the transition well before cessation, rather than treating JIBAR Cessation as the starting point for awareness. Early education is key.
3. Audit legacy contracts and scope exposure
   Identify all contracts referencing JIBAR across loans, bonds, derivatives and other commercial arrangements, with particular focus on instruments maturing after JIBAR Cessation, to assess organisational exposure by value, tenor and counterparty.
4. Review contractual fallback provisions
   Consider whether existing fallbacks are triggered by JIBAR Cessation; whether they clearly specify an alternative rate, and whether they appropriately address economic neutrality. Contracts lacking effective fallbacks should be prioritised for amendment.
5. Plan and execute remediation strategies
   Engage early with lenders, investors and counterparties to agree transition mechanics, timing (which need not always wait until JIBAR Cessation) and sequencing, including alignment with related hedging arrangements, to avoid a late-2026 operational cliff-edge.
6. Prepare operationally and systemically
   Update systems to support compounded overnight rate calculations where necessary, revise interest determination and payment processes, and assess accounting and tax implications. Coordination across legal, treasury, finance, tax and risk functions is critical in identifying where external advisory input may be required.
7. Document decisions and strengthen governance
   Put internal approval frameworks in place for transition decisions, establish useful and appropriate document standards, maintain clear audit and risk records, and implement monitoring mechanisms to track progress and engage with evolving regulatory guidance and market conventions.

In short, the success of the JIBAR-to-ZARONIA transition at this tail end of the adoption phase will depend less on the availability of now-developed documentary tools, and more on the timing and quality of engagement by market participants. At this stage of the transition, waiting is not recommended. Early identification of affected processes and proactive engagement will be materially less disruptive and more cost-effective than reactive remediation as cessation approaches. The market’s remaining choice is not whether to move, but whether to do so deliberately or reactively. These preliminary steps to equip and empower businesses should not be underestimated. As with prior benchmark reforms, the market will adjust but will do so on terms set by those institutions who meet it halfway.