JOHANNESBURG?Fitch Ratings on Friday kept South Africa's credit rating one notch above junk but slapped the country with a negative outlook, citing risks to growth from an intensifying leadership struggle in the ruling African National Congress.

Fitch said it would maintain its BBB- rating. However, it warned that risks to the economy had grown ahead of the ANC's next party congress in 2017 and amid allegations of widespread government corruption implicating President Jacob Zuma.

"This will distract policymakers and lead to mixed messages that will continue to undermine the investment climate, thereby constraining [gross domestic product] growth," Fitch said in a news release.

Later Friday, a second ratings agency, Moody's Investors Service, is expected to release its review of South Africa's credit worthiness. Moody's currently has South Africa at Baa2, two notches above junk status, with a negative outlook.

Minutes before Fitch released its statement, the office of President Jacob Zuma said he would challenge in court a damning report from the country's top corruption watchdog.

The report?released earlier this month by South Africa's public protector, an official position similar to that of an ombudsman?alleged there were "worrying" indications that Mr. Zuma allowed a family of wealthy businessmen to direct cabinet appointments and gain overly generous government contracts.

The report demanded that Mr. Zuma set up a commission to inquiry to further investigate the ties between the president and other government members and the Gupta family.

"The report underlines the risks to state-owned enterprise (SOE) governance and has led to the resignation of the CEO of the state-owned electricity company Eskom," Fitch said.

Write to Gabriele Steinhauser at gabriele.steinhauser@wsj.com

(END) Dow Jones Newswires

November 25, 2016 11:25 ET (16:25 GMT)

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