The ANC is due in December to pick a successor to President Jacob Zuma as party leader in a contest that so far has no clear front-runner.
“Tensions within the ANC have been rising, and the next leader will shape not only the party’s future, but also the country’s structural outlook,” said Soledad Lopez, an emerging-market strategist at UBS Group in New York.
“The outcome of the ANC leadership race is too close to call. We expect volatility to continue as political uncertainty might increase in the run-up to the ANC elections in December.”
The 12% gain in South Africa’s main stocks gauge this year is less than half the 26% advance by its emerging-market peers.
That partly reflects unease among investors over management of the economy under Zuma, who fired his respected finance minister in March, and concern that the ANC won’t select a candidate focused on reinvigorating the economy or decisively tackling corruption. Zuma’s term as president ends in 2019.
Foreign investors have sold a net R65 billion of South African stocks this year, following sales of R124bn over the whole of 2016.
HSBC Holdings said in July that “there are more exciting opportunities elsewhere”, as it cut South African equities to neutral from overweight.
Zuma is ensuring that he anoints his successor, Jefferies Hong Kong chief global equity strategist Sean Darby said earlier this month, just after the president survived an eighth bid by opposition lawmakers to remove him in a no-confidence vote.