JOHANNESBURG - South Africa's economic growth will be significantly hampered by increasing political uncertainty in the run-up to the ruling African National Congress's leadership contest in December, Fitch said on Thursday.
In a report released by its BMI research arm, Fitch said a turn to more "radical rhetoric and policy positions by the traditionalist wing of the party" would weigh on investor confidence.
"Mining and manufacturing activity are likely to be hit especially hard by the political challenges, as the elevated policy uncertainty stymies much-needed investment," Fitch said in the report.
The continent's most industrialised economy contracted in the last quarter of 2016 and the first of 2017 before recording marginal growth in the second quarter. Average expansion is forecast around 1 percent for the next three years.
Fitch and S&P Global Ratings both downgraded South Africa's foreign-currency rating to speculative grade, or junk, following an abrupt cabinet reshuffle in March that saw the respected Pravin Gordhan axed as finance minister by President Jacob Zuma.
Zuma is due step down as ANC president in December, when the party elects new leadership, and as national president in 2019,
Along with allegations of corruption and mismanaging the economy, the ANC has been riven by fighting between factions backing Deputy President Cyril Ramaphosa and former
African Union head Nkosazana Dlamini-Zuma as leadership candidates. "Even after a new leader is chosen, deep-seated divisions within the party will limit the scope for much-needed structural reforms," Fitch said.