Mpshe said "abuses of process" uncovered in taped conversations were behind the decision to drop the charges.

The NPA said the case was now closed and no further charges would be brought against Zuma, whose African National Congress is widely expected to win an April 22 election and choose him as president of Africa's biggest economic power.

However some analysts said dropping the charges on a technicality without establishing Zuma's innocence meant the case would still overshadow his presidency.

"In light of the above, I have come to the difficult conclusion that it is neither possible, nor desirable for the NPA to continue with the prosecution of Zuma," Mpshe, acting head of the National Prosecuting Authority (NPA), told a news conference.

Dropping the corruption, fraud, money laundering and racketeering charges ends a case that has dragged on for 8 years and damaged Zuma's credibility as a leader.

"This ruling partly clears his name but it does not take away the merit of the charges," said Shadrack Gutto, law professor at the University of South Africa, according to the Reuters.

"On merit it was a very good case to prosecute, his name is not clear; it is not a comfortable situation. Zuma must only be too happy that no prosecution will take place."
The case has been closely followed by investors looking for political stability in Africa's biggest economy and has raised questions about the independence of South Africa's judiciary.

The decision to scrap the charges had been widely expected and the rand currency was largely steady after the decision, trading at 9.00 against the dollar at 1001 GMT, from 9.01 before the announcement.

Mpshe called for an investigation into the abuses of process but said there was no conclusive evidence that former President Thabo Mbeki -- Zuma's arch foe -- was involved.

Mpshe read out excerpts of taped conversations between the former head of the elite Scorpions crime-fighting unit, Leonard McCarthy, and former NPA head Bulelani Ngcuka in which they discussed timing the charges against Zuma to cause political damage. The transcript was peppered with expletives.

Zuma, who denies wrongdoing, has said he has been the victim of a political conspiracy while his opponents have accused the ANC of back-room deals to clear his name.

In Johannesburg, Zuma supporters wearing yellow ANC T-Shirts sang, waved ANC flags and danced after hearing the decision. The NPA said Zuma himself had been informed earlier.

Prosecutors said the decision did not amount to a formal acquittal of Zuma, adding he may have to go to court for a formal withdrawal of charges.