South Africa's currency may have taken a battering in recent months, making it one of the worst performing major currencies this year, but analysts have told CNBC that the rand (ZAR) could be ready for a turnaround in 2013.
AP
On Tuesday, Jacob Zuma was re-elected as the leader of the ruling African National Congress. He received the majority of votes at the party conference after being challenged by his deputy Kgalema Motlanthe.
It means Zuma is looking likely to continue as president of the country until 2019 despite a tumultuous year that has seen the rand fall 7.5 percent against the dollar.
Analysts at Absa Capital saw the elections and the U.S. "fiscal cliff" as key near-term risks. But with the fiscal cliff being resolved and improving chances of a fiscal deal in the U.S., Absa are now relatively bullish on the rand in the second half of 2013.
"We are expecting the ZAR to stage a recovery in 2013," Mike Keenan, forex strategist at Absa Capital said in a research note.
Improved global sentiment and reduced domestic bearishness are two reasons Keenan is "cautiously" optimistic on the rand and says commodity prices and capital inflows are likely to support it further.
"It tends to work that one year's worst performers become next year's surprise packages in the world of currency," Jeremy Cook, chief economist at World First told CNBC.com.
In August police shot dead 34 striking miners at a Lonmin facility as activity in the industry was severely disrupted. Strikes and increased wage demands soon spread to other mining firms, which added to a current-account deficit of 6.4 of gross domestic product (GDP) for South Africa, both in the second and third quarter.
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"This has been the worst performing currency market this year and the reason for that were all the mining sector, labor market issues that occurred in August, September, and actually they're still going on and there is still concern here with regards the current account data there," Wike Groenenberg, emerging markets FX Strategist at Citi told CNBC.
World First's Cook also said the country's problems were far from over.
"South Africa has had a tough year in 2012 and we expect similar pressures in 2013. Strikes and a lack of mine production in Q4 has dragged down output and export productivity while inflation has started to creep higher," he told CNBC.com
"Ratings agencies are also set to weigh further on the South African economy in early 2013 and we would expect at least 2 cuts, both of which to be rand negative."
Absa Capital meanwhile have given projections that the rand would reach around 8.20 against the dollar by next December from 8.48. The rand has already strengthened from 8.64 against the dollar after the election results were confirmed.
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David Bloom, head of foreign exchange strategy at HSBC, told CNBC that forex traders have a tendency to shy away from emerging market currencies even though they could show real promise against other currencies.
"The question is does South Africa have things that people want? Yes," he said.
"Therefore over a longer time horizon, the rand will be I think a very good story."