For the upcoming year, significant changes in interest rates are anticipated in South Africa. This might have an impact on the entire economy and affect borrowing costs, and investment decisions.
According to BusinessTech, a business-focused publication, South Africa’s key benchmark interest rate, the Johannesburg interbank Average Rate (JIBAR) will be replaced by a new index in 2025, the South African Rand Overnight Index Average (ZARONIA), which aims to improve the accuracy in the calculation of interest rate nationwide.
“The South African Reserve Bank (SARB) has completed the observation period for the South African Rand Overnight Index Average (ZARONIA),” the publication states.
JIBAR, the primary benchmark interest rate in South Africa plays a crucial role in pricing and valuing financial products. It reflects banks’ borrowing costs for terms up to 12 months and is extensively used in financial agreements with outstanding contracts referencing the 3-month JIBAR exceeding R340.6 trillion, the publication explains.
However, the above-mentioned business hub further adds that in comparison, ZARONIA is calculated from overnight transactions in the wholesale funds market and is more reliable as it reflects the real overnight borrowing costs which aligns with international risk-free rate standards. Therefore, the new index is now the recommended alternative reference rate for ZAR-dominated contracts.
”South Africa’s financial landscape is undergoing a significant change, with the transition from the JIBAR to ZARONIA as the primary reference rate,” says Zakhele Nyandeni, director at BDO, an international network of public accounting, tax and advisory firm. He also added that it is crucial to grasp and adjust to this transition in order to uphold stability, integrity, and transparency within South Africa’s financial markets.
