Reforming South Africa's interest rate

The Market Practitioners Group (MPG) is a joint public and private sector body, comprising  representatives from the SARB, the Financial Sector Conduct Authority (FSCA), and senior professionals from a variety of institutions from different market interest groups active in the domestic money market. The primary purpose of the MPG is to facilitate final decisions on the choice of interest rate benchmarks to be used as reference interest rates for financial and derivative contracts, and to direct market participants through an orderly transition towards the use of those benchmark rates.

In June 2020, the SARB published the Draft Statement of Methodology and Policies Governing SARB-administered interest benchmarks, which is a technical specification paper that details the calculation methodologies, contingency arrangements and policies governing four new benchmarks and a reformed version of the existing overnight benchmark rate – the South African Benchmark Overnight Rate (Sabor). The MPG has designated one of the benchmarks, namely the South African Overnight Index Average (ZARONIA) as the preferred successor rate that will most likely replace the Johannesburg Interbank Average Rate (Jibar), which currently underpins a significant number of financial contracts. Consequently, the conceptual design of ZARONIA was rigorously tested using bona fide transactions data to ensure that it is reliable, robust and sufficiently stable. The back-testing results were published in a report titled Feedback on the draft statement of methodology and policies governing the SARB-administered interest rate benchmarks.

The MPG will remain in existence until the new benchmarks have been implemented and embedded, after which the Reference Rate Working Group of the Financial Markets Liaison Group (FMLG) will assume responsibility for further work on reference interest rates.

Interest rate benchmark reform journey