A South African man and woman taken hostage by Somali pirates in October 2010 have been released and are in the hands of the Somali government, a Reuters witness said on Thursday.

Armed pirates hijacked the pair's yacht as it was about to enter the Mozambique channel south of the Tanzanian port city of Dar es Salaam. A third crew member was rescued by the EU anti-piracy taskforce.

"Today we are happy to get our freedom back," Bruno Pelizzari, one of the freed sailors, told reporters.

It was not immediately clear if a ransom was paid. The pirate gang initially demanded $10 million from the families of Pelizzari and his companion Debbie Calitz.

The ransom demand dropped as low as $500,000 in March last year, according to a blog set up to highlight their plight, but was raised again as negotiations stumbled.

Somali pirates preying on merchant vessels and private yachts in the Indian Ocean and Gulf of Aden raked in more than $150 million in ransoms last year.