A judge has thrown out a corruption case against former South African deputy president Jacob Zuma, a contender for the country's top job.

Judge Herbert Msimang stopped short of completely dismissing graft charges against Zuma, leaving the door open for the prosecution to reframe the charges. Uncertainty over his fate has created "market jitters", said economists.

National Prosecuting Authority spokesman Makhosini Nkosi said on Wednesday that the state intended to bring the matter to trial again, and added it had a "strong and winnable case" against Zuma.

Zuma was accused of having a corrupt relationship with his former financial advisor and taking bribes from a French arms company in exchange for helping to clinch multimillion-dollar government contracts.

"There will be uncertainty until the time he is charged again, and until [President Thabo Mbeki's] successor is announced in the [ruling] ANC (African National Congress) conference next year," said Pieter Laubscher, chief economist of the Bureau for Economic Research at the University of Stellenbosch.

The judge dismissed the case with the explanation that the prosecution had "limped from one disaster to another" and had failed to follow correct procedure, causing much jubilation among Zuma supporters. Zuma was cleared in May of raping an HIV-positive woman.

Laubscher noted that following the judgment the rand, the local currency, had weakened to 7.41 per dollar from an overnight close of 7.36.

Economist Iraj Abedian, of Pan African Investment and Research Services, said while Zuma had not made any pronouncements on the government's existing pro-market economic policy, the uncertainty over his fate had affected the market.

Zuma and his supporters have claimed that the rape and corruption charges were part of a plot to keep him from becoming president. He was sacked as deputy president after being linked to the graft scandal, and also drew international criticism for his comments about AIDS during the rape trial.

Senior ANC leaders believed the temporary reprieve would help boost support for Zuma, but political analyst Aubrey Matshiqi pointed out that because charges could be brought against him again, the former deputy president was not yet able to make a clear run for the top job.

"It is still too early" to predict whether Zuma would succeed Mbeki, who has stood for good governance on the continent, Matshiqi said. It was also premature to speculate whether Zuma, should he become president, would be able to place Africa on the global agenda as effectively as Mbeki, who ends his second and final term in office in 2009.

The left wing of the tripartite alliance, which consists of the ruling African National Congress, the South African Communist Party (SACP) and the South African Congress of Trade Unions (COSATU), has embraced Zuma as their champion in apparent opposition to Mbeki's centralised and technocratic style of leadership. The long-running battle, despite the party's attempts to paper over the cracks, has been described as the ANC's worst crisis since it won power in 1994.

Support for Zuma has also fractured the left, mainly within the SACP and COSATU. Divisions in COSATU became evident at the federation's conference to elect a new leadership this week, when the pro-Zuma camp fielded a candidate against current COSATU president Willie Madisha, who has resisted attempts to get him to support the former deputy president.

Zuma's temporary legal reprieve, received with deafening applause at the COSATU conference outside Johannesburg this week, was bad news for Madisha and others on the left who have been reluctant to back the former vice-president.

"Anything can happen until the [ANC] conference next year," a senior ANC leader commented. "But, as of now, the distance between Zuma and his possible competitor for the position [of South Africa's president] has become very wide."