Authored by Steve Chemaly and Jackie Midlane.
The context for this article is the potential appearance into the South African market of a new forward looking term rate, with a profile similar in certain respects to JIBAR (but calculated very differently to JIBAR), which will be known as Term ZARONIA. Term ZARONIA and RFR ZARONIA may potentially co-exist in the SA market, although the Market Practitioners Group’s initial feedback is that the Term ZARONIA use case will be limited to trade and commodity finance, fixed rate mortgage bond lends and related securitisations, and that its entry into the market, while desirable, is not an absolute certainty.
What is certain, is that Term ZARONIA is very much needed so that commercial transactions can be priced upfront with a degree of certainty as to the anticipated cost of funding for each forward-looking interest period, which would typically be a one, three, six, nine or 12 month period
What is Term ZARONIA
Term ZARONIA is a forward-looking term rate based on RFR ZARONIA-linked derivatives.
What is the difference between Term ZARONIA and RFR ZARONIA
RFR ZARONIA is calculated and compounded daily. It is a backward-looking, daily calculated and compounded interest rate (but the interest rate for any given business day will only be known and published on the following business day). Term ZARONIA, on the other hand, is a forward-looking term interest rate, fixed for the tenure of each forthcoming, future interest period (which could for example, be any of one, three, six, nine or 12 months). Term ZARONIA provides contracting parties with upfront certainty of the interest amount to be charged for the applicable tenure of each forthcoming, future interest period, and as such supports business certainty and accurate forecasting, in respect of such interest period.
Appointment of administrator for a forward-looking ZARONIA term rate
The Market Practitioners Group (MPG) has selected FTSE Russell, a subsidiary of the London Stock Exchange Group, to serve as the administrator of Term ZARONIA. FTSE Russell’s appointment follows a request for a calculation methodology proposal by SARB issued in October 2025.
Will there be sufficient liquidity in the SA market for a Term ZARONIA
This is being determined. The MPG’s final endorsement of the term rate remains subject to sufficient liquidity developing in the ZARONIA derivatives markets to support a robust and reliable benchmark.
Term ZARONIA use cases- will these be limited
The select use cases for a Term ZARONIA are expected to be limited to:
- Trade and commodity finance
- Fixed rate mortgage bond lends; and
- Related securitisations
When should we anticipate being able to use Term ZARONIA
Subject to the MPG’s determination of sufficient liquidity, and the finalisation of the required calculation methodology, we anticipate the introduction of Term ZARONIA sometime during the course of the next 4-7 months, although the realisation of this term rate is not guaranteed.