South Africa's Malema loses appeal against ANC suspension

African National Congress Youth League (ANCYL) leader Julius Malema addresses his supporters during a march in Johannesburg October 27, 2011.

JOHANNESBURG (Reuters) - South Africa's ruling ANC on Saturday upheld a decision to ban youth leader Julius Malema for five years for bringing the movement into disrepute, sending into the political wilderness a noisy rebel who had called for the nationalisation of mines.

The decision by an African National Congress appeals panel is likely to alter the South African political landscape by sidelining one of the most vocal foes of President Jacob Zuma.

But it will not put to rest the questions Malema raised about why the poor majority in Africa's largest economy have still not felt the "better life for all" promised by the ANC since it took power in 1994 after the end of apartheid.

The appeals committee upheld convictions against Malema and other ANC Youth League members handed down in November for bringing the party into disrepute and for causing rifts in Africa's oldest liberation movement.

It allowed an additional internal hearing for Malema to seek a lighter penalty. He cannot escape suspension under ANC rules but he has a chance to argue for a shorter ban.

Malema, 30, shot to rock star-like fame with calls to nationalize mines in the major platinum and gold producing country and to seize white-owned farms. The populist appeals earned him legions of supporters from the poor black majority but unnerved investors and rattled more conservative ANC policy makers.

Malema will be stripped of his position as president of the ANC Youth League and, although his ideas still find resonance in some sectors of the ANC, his suspension should silence for now his calls for a state takeover of mines, analysts said.

His influence will be seen in how far Zuma pushes for greater state control of the economy when he delivers his State of the Nation policy address on Thursday, analysts said.

"The ANC middle ground agrees with Malema's point that 1994 was a bad deal and most black South Africans have not been liberated economically," said independent political analyst Nic Borain.

"Malema's November conviction put to bed the challenge to leadership and his policies. But since then, the policy debate has been diverted about the role of the state and how to maximize the advantages from the mining industry," he said.

Reports this week suggest the ANC is ready to bury Malema's mine nationalisation plan. Instead, it may raise levies and set up ventures to process more minerals at home.

"GETTING TO THE TRUTH"

Zuma's path to re-election as leader of the ANC at the end of this year would have faced a serious obstacle if Malema had remained in the movement.

If Zuma wins he is almost certain to be the party's nominee for the 2014 presidential election, and given the ANC's stranglehold on politics, its candidate is virtually guaranteed to win the race.

Malema had become one of the most prominent critics of Zuma, voicing the concerns of factions in the party frustrated with what they see as ineffectual and visionless leadership.

Major ratings agencies are also worried.

Fitch, last month, and Moody's a few months ago downgraded the outlook for South Africa, saying Zuma's government has not done enough to tackle structural problems including chronic unemployment, growing state debt and a rundown education system.

"Ratings agencies appear to be looking at the longer term weak growth trajectory in South Africa, the economic progress that isn't being made, especially with job creation, and they are assuming on that basis perhaps more political risk than might be currently justified," said Razia Khan, head of Africa research at Standard Chartered.

Malema had also been criticized during his meteoric rise to prominence for taking advantage of the poor to build a political base and win financial backing - while himself leading a life of luxury, with fine homes, cars and expensive watches.

But whatever the fate of the messenger, Malema's message about the poor is still as potent as ever, said South African Institute for Race Relations researcher Catherine Schulze.

"If the country is not able to sustain higher levels of economic growth, new Malemas will come to the fore either inside or outside the ANC," she said.

The ANC cannot afford to grow complacent about his warning. Youth unemployment is at about 50 percent and the ANC has faced hundreds of violent protests for not doing enough to provide electricity and basic schools and to clean up corruption.

One Malema supporter accused the ANC of using apartheid tactics in removing the youthful rebel from its ranks.

"Malema is right because he has been getting through to the truth," said Christopher Mangale, outside the ANC's Johannesburg's headquarters after the decision.

"The ANC has to organize jobs because the people are only getting poorer," he said.

(Additional reporting by Olivia Kumwenda, Pascal Fletcher and Ed Stoddard; Editing by Pascal Fletcher and Louise Ireland)