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Smith picked up a abdominal strain while playing for New Zealand A and has been sidelined for a couple of weeks.
He has recovered well and his presence in the side will boost the bowling stocks in particular.
His variations make him a very handy bowler to call on when the slog is on during the final overs of an innings.
Rae has also been involved with the New Zealand A programme and his energy will be welcomed at the bowling crease.
He replaces Travis Muller in the squad, while all-rounder Josh Finnie makes room for Smith.
Finnie dislocated his finger while fielding during the 61-run loss to Canterbury at Molyneux Park late last year.
But while he is still in some discomfort, the injury was not enough to rule him out.
Finnie was unable to make an impact during the early rounds of the one-day tournament and lost his spot to Llew Johnson for the opening game of the Super Smash.
Johnson certainly grabbed his chance. He top-scored with a knock of 72 from 44 balls during the comfortable 45-run win against Auckland.
The 20-year-old will look to lend support to the likes of Hamish Rutherford and Neil Broom.
They are Otago’s most experienced pair and will look to attack at the top of the order.
But the return of Smith and Rae will boost a very handy Volts bowling line-up, which includes Jacob Duffy and Mitchell McClenaghan.
"We’ve got two very good players coming back and strengthening our squad," Otago coach Rob Walter said.
"And it is always nice to have Nathan’s all-round ability back. It gives us a few more options with the ball and with what Razor [Rae] offers with the ball as well."
Otago has a record of one good win and one heavy loss. The Volts were able to replicate the bold brand of cricket they play last season in the win against Auckland.
But they struggled with the bat against Canterbury. The team did not bowl well during the powerplay and batting in the second innings proved hard going.
The pitch had lost some pace after a taxing schedule of four games in two days.
"We learned the value of batting first during that game, but we needed to react a little bit quicker to the conditions in front of us," Walter said.
"We needed to restrict them more, which would have made that chase more doable because it ended up a very difficult chase."
Tim Seifert shapes as an important wicket for the Volts. He has been a good form for the Black Caps and his ability to strike the ball at the top is a real asset for Northern Districts.
Further down the order, Brett Hampton is a heavy hitter who can be destructive if he gets in.
Scott Kuggeleijn shapes as the main threat with the ball for the Knights. He is a rather handy lower-order batsman in the T20 format as well.