"In order to give our practical expression of support to the oppressed people of Palestine, the ANC has unanimously resolved to direct the SA government to immediately and unconditionally downgrade the South African Embassy in Israel to a Liaison Office", said a statement from the party.
This unprecedented move comes amid severe global backlash following US President Donald Trump's declaration that the US recognizes Jerusalem as Israel's capital.
The decision was taken at the end of a five-day African National Congress conference, in which Cyril Ramaphosa was elected as its new leader and South Africa's likely next president after 2019 elections, following Jacob Zuma.
It, however, remains to be seen whether or not the resolution will be implemented, since the ANC at its 2012 conference also had approved a policy to boycott Israel.
South Africa's ruling party has ratified a proposal for the state rather than private shareholders to own the central bank.
He added: "The World Jewish Congress stands with the South African Jewish community in opposing this decision that is brimming with double standards and unsafe implications".
The Jewish board of deputies has said that the move would leave South African's "economically poorer". Earlier on Wednesday minister in the Presidency Jeff Radebe said the land reform issue is to be resolved urgently if South Africa is to have peace. He added that keeping relations with Israel had enabled South Africa to directly voice its objections to the Israeli government, as well as maintain a diplomatic office in the Palestinian city of Ramallah.
"We need a common vision, a leadership that brings the full potential of SA together to address the problems we face", Coovadia said in a statement.