JOHANNESBURG, The South African Rand has broken through the 12-Rand level against the US dollar for the first time in two-and-a-half years after the local currency strengthened by nearly 1.0 per cent against the greenback since the start of the year on Wednesday.

The Rand strengthened Wednesday to around 11.94 to the dollar, mainly on the back of the dollar trading at its weakest level against other major currencies in more than three years.

Analysts said the current drive by the ruling African National Congress (ANC) to estore South Africa’s investment image after corruption scandals involving senior officials is helping market sentiment.

Investec analyst Annabel Bishop said this was adding on to the effect of a weaker dollar, which is caused by concerns over US economic policies.

Positive comments from South African officials in Davos on South Africa ending corruption, repairing SOEs (state-owned enterprises) governance and the health of public finances, maintaining key institutional strengths and promoting economic growth have also assisted in liftiing the domestic currency, Bishop said.

Earlier on Wednesday, Trade and Industry Minister Rob Davies told the African News Agency (ANA) on the sidelines of the World Economic Forum in Davos, Switzerland, that there was optimism around the country’s growth prospects, partly helped by a more stable political outlook after the ANC’s December elective conference, which resulted in a new top leadership line-up being voted in.

Investec’s Bishop warned, however, that risks remained for the Rand, saying rating agencies which have downgraded South Africa to sub-investment grade would be watchig the budget in February for both fiscal consolidation and the avoidance of excessive tax hikes which strangle economic growth.

Moody’s, the last key agency which has South Africa on investment grade, is set to deliver a downgrade after the budget if the above priorities are not met, and if insufficient progress has been made on SOE governance reform, she added.