13 March 2026 Industry News

Future-Proofing the Real Economy: What South Africa’s Benchmark Rate Transition Means for You

South Africa is in the middle of a significant change to how interest rates are calculated and referenced across the financial system. On 3 December 2025, the South African Reserve Bank (“SARB”) formally announced a clear timeline for replacing the Johannesburg Interbank Average Rate (“JIBAR”), the current benchmark used by banks and institutions, with a new, more reliable standard called the South African Rand Overnight Index Average (“ZARONIA”).

For most readers, terms like “interbank benchmarks” can sound abstract and distant. This article explains what is changing, why it matters and, most importantly, what it means for you as a BC Funding Solutions (“BCFS”) client

All BCFS agreements are linked to the South African Prime Rate, not to JIBAR or any other interbank benchmark. This means the changes described below do not affect your returns, your payment schedule, or your agreements with us in any way.

Understanding the Transition

In plain terms: JIBAR was based on estimates, not real data. A small group of banks would submit their opinion on what lending between banks should cost, rather than reporting what they had actually charged. Over time, this reliance on subjective submissions, rather than real transactions, created a transparency problem and, as seen globally with the LIBOR scandal (2005–2009), a risk of manipulation.

ZARONIA fixes this by drawing on billions of rands in real transactions that take place every day in the wholesale money market. Instead of asking banks what they think rates should be, the SARB measures what rates actually were. It’s the difference between asking someone to estimate the temperature and actually reading a thermometer.

This phrase simply refers to the very short timeframe involved. ZARONIA measures the cost of lending money overnight, for just 24 hours. Because the loan period is so short, the chance of something going wrong before repayment is extremely small. This makes it a clean, stable base from which to measure the true cost of money, without the additional layers of risk that come with longer lending periods.

By contrast, JIBAR was based on 3-month lending. Over three months, there is more that can go wrong, so lenders charged more to compensate. ZARONIA removes these extra charges, giving a purer picture of what money actually costs.

Because JIBAR and ZARONIA measure different things, 3-month lending versus overnight lending, they will naturally sit at different levels. You cannot simply swap one for the other without changing the economics of existing agreements.

To solve this, regulators introduced what is known as a Credit Adjustment Spread (“CAS”). Think of it as a top-up figure added to ZARONIA to make it economically equivalent to what JIBAR was. It captures the additional risk and time premium that JIBAR used to include. On 3 December 2025, this adjustment figure was officially fixed, giving the market a clear and agreed bridge between the two rates.

In theory, given the Credit Spread Adjustment, institutions moving from JIBAR to ZARONIA should not be materially affected by the change.

At a Glance: How the Three Rates Compare

JIBAR (Current) ZARONIA (New)
What it is An estimate of future lending costs A record of what actually happened overnight
Based on Quotes from a small panel of banks Billions of rands in real daily transactions
Risk included? Yes, includes bank risk + time risk No, near risk-free overnight
Direction Forward-looking (what banks think) Backward-looking (what actually occurred)
Status Ceasing 31 Dec 2026 Live from 1 Jan 2027

 

The SARB has set clear milestones:

  • 31 March 2026 — “No New JIBAR”: From this date, no new financial contracts may reference JIBAR. Banks and institutions must use ZARONIA for any new agreements.
  • Early to Mid 2026: The SARB is expected to publish detailed guidance on the transition framework, available through the Market Practitioners Group (“MPG”) media releases.
  • 31 December 2026 — JIBAR’s final publication: After this date, JIBAR ceases to exist as a recognised benchmark.
  • 1 January 2027: ZARONIA becomes the primary institutional benchmark across South Africa.

No immediate changes to Prime are expected. The Prime Rate operates on a simple, long-established formula: it is the SARB’s Repo Rate plus 3.5%. If the Repo Rate is 7.75%, Prime sits at 11.25%. This has been the convention for decades and is the rate to which all BCFS agreements are linked.

There are ongoing discussions within the banking sector about whether Prime could eventually evolve, but any such change would be a measured, industry-wide process with significant advance notice, given that Prime underpins millions of lending agreements across South Africa. For now, Prime is stable.

BCFS is monitoring these discussions closely and will keep clients informed of any material developments.

Impact Summary for BCFS Clients

For the community schemes we fund, the direct impact is nil. Every BCFS agreement, whether for project finance or a levy stabilisation loan, is linked to the Prime Rate. We do not reference JIBAR in any of our lending documentation. As a result, the cost of your credit with us remains stable and is not affected by the interbank market’s transition.

None. Because your arrangement is linked to Prime, you are not affected by the complex “fallback” negotiations that institutional fund managers are currently working through. There is no need to update legal language, renegotiate terms, or take any other steps. Your “Prime + agreed spread” return remains exactly as agreed.

BCFS is managing all relevant aspects of this transition in the background, ensuring that our documentation and processes remain up to date.

Impact Summary for BCFS Clients

What This Affects Impact on BCFS Clients
Your return structure (Prime + spread) Unchanged
Payment dates Unchanged
Security arrangements Unchanged
Commercial terms Unchanged
Action required from you None

This transition is a meaningful upgrade to South Africa’s financial infrastructure. By moving from an estimate-based benchmark to one grounded in actual market transactions, the country’s reference rate framework aligns with the approach already adopted in the United Kingdom (SONIA) and the United States (SOFR). This improves the reliability and transparency of the rates that underpin lending, investment, and monetary policy across the economy.

For the financial system as a whole, basing benchmarks on real transactions rather than submitted opinions reduces the risk of errors or inconsistencies in rate-setting — a benefit for borrowers, lenders, and the broader economy alike.

Still have questions? Click below to contact us.

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Tshepo Seanego

Disclaimer

This article is provided for informational purposes only and does not constitute financial, legal, tax, or investment advice. The views expressed are those of the author and do not necessarily reflect the views of BC Funding Solutions (Pty) Ltd or any of its affiliates. Nothing in this article should be interpreted as an offer, recommendation, or solicitation to invest in any financial product or structure.

Lending to community schemes and the recovery of arrear levy debt are not regulated financial services under the Financial Advisory and Intermediary Services Act No. 37 of 2002 (“FAIS Act”) and do not constitute the promotion of a financial product as defined by the Financial Sector Conduct Authority. BC Funding Solutions (Pty) Ltd is a private entity that facilitates loans to Community Schemes.

BC Funding Solutions (Pty) Ltd is a is an authorised Financial Service Provider (FSP 55147), however its FSP license applies exclusively to the intermediary and administrative services it provides to its institutional funding structures, including the financial products introduced through our Special Purpose Vehicle (SPV) framework.

It does not apply to the private-lender environment. Our private-lender products fall outside the FSCA’s product-specific licensing categories, which means:

  • There is no change to how our private-lender  products are marketed,
  • Our channel owners and consultants may continue to operate under the current model, and
  • No additional licensing obligations are introduced for external partners at this stage.

The examples and return figures referenced in this article are provided for illustrative purposes only. Past performance is not a guarantee of future results. Returns quoted are indicative, unaudited, and may be affected by market conditions, legal developments, liquidity, or other operational factors. No assurance is given that any future investment or lending opportunity will achieve similar outcomes.

Readers are strongly advised to consult with a qualified attorney, tax advisor, and/or financial planner before making any investment or lending decision. Any consideration of an opportunity involving community scheme lending should take into account the legal framework, potential risks, liquidity profile, and personal financial objectives of the individual or entity concerned.

BC Funding Solutions (Pty) Ltd does not provide tax or financial planning advice. Individuals should consult with appropriate professionals regarding the tax and regulatory implications of participating in any form of private lending or credit facilitation. Click here for full disclaimer.