The agency has also become a "political football", according to CEO James Henderson.
Bell Pottinger began working with Oakbay Investments, which has interests in industries ranging from media to mining, in March 2016.
It has since been accused in South African media and social media of using racially-divisive language as part of a political campaign involving Oakbay majority owners the Gupta family and the country's president Jacob Zuma.
A document apparently originating from the South African Communist Party, purporting to describe Bell Pottinger's work with the Guptas, has further spread concerns about Bell Pottinger in South Africa since its release on 31 March.
The agency has been the subject of much anger, with its staff targeted on social media. New financial and corporate MD Victoria Geoghegan has been subject for particular abuse, being called "evil" and "bloodthirsty" by a number of Twitter users.
Bell Pottinger has now stepped away from the account at the mutual agreement of the client. Henderson told PRWeek there had been a "gross misrepresentation" of its work. "Our role was a corporate reputation brief and we are being accused of orchestrating a huge political campaign," he said.
Henderson said he believed the Communist Party was one of the key players in instigating and spreading allegations against the agency. "It’s very political, we have become the story, we have been targeted by the opposition, we have become the political football in the middle of this fight. Nobody in the business has had any contact with Zuma," he said.
He also said it was wrong to suggest the agency had used racially-charged language or stoked racial tensions, and that it was "completely untrue" that the agency had created fake Twitter accounts as part of its work, as has been alleged.
"Clearly we had become the story so much so that it had become impossible to effectively represent that client," Henderson said, adding that "abusive and threatening" comments made to staff on social media had also contributed to the decision to step away from Oakbay.
There are plans for South Africans to protest outside the agency's London office on Saturday, according to one Twitter user.