JP Morgan on Tuesday downgraded South African equities to "neutral" from "overweight," citing concerns over an economic slowdown and the effectiveness of the country's policy reforms.

"While South Africa's investment case on reforms remains an attractive point of departure, it is unlikely to result in meaningful (economic) growth that's above 2% in the coming two years," the brokerage said in a note.

Since the aftermath of the 2008-09 global financial crisis, the government of Africa's most industrialised nation has struggled to deliver economic growth rates high enough to make a dent in inequality and unemployment.

In January, South African Reserve Bank (SARB) Governor Lesetja Kganyago told Reuters in an interview that the region's economic growth could be close to 2% in 2025.

Last month, South African President Cyril Ramaphosa said his government would launch a second wave of reforms to try to bolster economic growth, by boosting struggling state companies and investing in infrastructure.

But despite improved power availability in the past year and optimism that the ruling Government of National Unity (GNU) coalition will seek to push through growth-enhancing reforms, the operating environment is expected to remain challenging for many businesses.

"We expect foreign investors to apply a wait-and-see approach while domestic investors will have to straddle the options of GNU’s imperfect execution of its reform agenda," the brokerage said.

Last month, US President Donald Trump signed an executive order to cut US financial assistance to South Africa, citing disapproval of its land policy and of its genocide case at the International Court of Justice against Washington's ally Israel.

"Global dynamics resulting in South Africa/US relations being strained by matters involving expropriation, ICJ case and domestic affairs around affirmative action...create uncertainty around the performance of South Africa's domestic assets," JPM said.

The brokerage said it prefers Emerging European equities within the Central & Eastern Europe, Middle East & Africa (CEEMEA) region, but prefers South African stocks to Middle East and North Africa's (MENA) equities.