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The case, the ruling party had previously said, involved balancing two competing constitutional rights - the right to human dignity and the right to freedom of artistic expression.
The Goodman Gallery will no longer display the painting, which has been sold to a German collector.
The 1.85m-high painting, titled The Spear, was part of Murray's Hail to the Thief II exhibition.
Gallery director Liza Essers said she regretted the pain that the display of the painting had caused the President and the nation.
Essers said the gallery and the artist had no intention of hurting or upsetting anyone, but understood that it did hurt people and the nation.
"It was never the Goodman Gallery or Brett Murray's intention to hurt anyone or harm their dignity," said Essers.
ANC spokesperson Jackson Mthembu said they were happy that both Murray and the gallery had acknowledged this.
"The image has conjured up past historical hurt and humiliation for some people in our country," he said, adding that SA had learnt lessons that would help the nation not to repeat the same mistake.
SAnews.gov.za is a South African government news service, published by the Government Communication and Information System (GCIS). SAnews.gov.za (formerly BuaNews) was established to provide quick and easy access to articles and feature stories aimed at keeping the public informed about the implementation of government mandates.
Go to: http://www.sanews.gov.za