UPDATE 2-South Africa is not "falling apart" - Zuma
* President Zuma seen likely to retain top ANC post
* Businessman Cyril Ramaphosa to stand as his deputy
* In speech, Zuma criticises faction-fighting and graft
BLOEMFONTEIN, South Africa, Dec 16 (Reuters) - President Jacob Zuma sought to dispel the concerns of rating agencies and investors about sluggish growth in South Africa on Sunday and insisted the country was not "falling apart".
In his opening address to a conference of the ruling African National Congress (ANC) to choose its leadership for the next five years, Zuma said two downgrades by international ratings agencies this year did not mean South Africa was in trouble.
"We want to dismiss the perceptions that our country is falling apart because of the downgrades," he said. "We continue to do our development work, we continue to plan for a recovery."
At the conference held in the central city of Bloemfontein and running through Thursday, Zuma, 70, is expected to garner enough support to head off a challenge to his party chief post from Deputy President Kgalema Motlanthe.
Retaining the ANC leadership puts Zuma in pole position to secure a second five-year term as South Africa's president in the next national election in 2014.
Spicing up the contest for top ANC jobs, former mineworkers' leader and anti-apartheid hero Cyril Ramaphosa, now one of South Africa's richest men, has agreed to stand for the post of ANC deputy president currently held by Motlanthe.
"He (Ramaphosa) is running," a senior party official told Reuters on Sunday. Motlanthe will be angling to retain the job if he fails to win the leadership, and there are likely to be at least two other candidates.
Zuma said in his speech that the government was relying on its long-term National Development Plan for undoing the "glaring and deep" inequalities left by white-minority apartheid rule, which ended in 1994.
The census reported this year the income of white households is six times higher than that of blacks.
"Today, the ratings agencies and investors are asking whether the ANC can continue to manage this economy so that we can grow, create jobs, manage our debt and provide policy certainty," Zuma said.
"Yes, the ANC will continue to provide strong economic leadership and steer our economy boldly."
South Africa's economy is forecast to grow 2.5 percent this year, well short of the 7 percent the government says is needed to make a serious dent in 25 percent unemployment.
SONG FOR MANDELA
Zuma led the 4,500 delegates in a rousing song which shook the massive tent where delegates gathered, that translated into English had the lyrics: "The road we are on is long, Mandela told his followers. We will meet on freedom day."
Former President Nelson Mandela, 94, has been in frail health for the past few years. He has been in a Pretoria hospital for more than a week for treatment of a lung infection and removal of gallstones.
Zuma called for an end to internal factional fighting and corruption in Mandela's 100-year-old liberation movement, which faces accusations from critics that it has lost its moral compass under the scandal-hit Zuma presidency.
"We mustn't look away when we see a cadre in government is corrupt," Zuma said.
ANC top brass said its system of deploying its members to work as bureaucrats is riddled with problems that cause leakage in funds meant for the poor. The Auditor General reported this year more than 90 percent of municipalities cannot account for all the money they receive and spend.
"If as a cadre you are not politically clear, you will think government is there to enrich yourself," Zuma said.
Corruption appears to be growing worse under Zuma, according to global monitoring agency Transparency International. Critics say billions of dollars meant for poverty eradication is being lost to graft, and that the Zuma administration is more concerned about patronage networks than effective policies.
Zuma, who has faced corruption charges but has never been convicted, has recently been raked over the coals on allegations his government has spent more than $20 million to rebuild his private rural residential complex.
THE CYRIL JOLT
Party insiders said Ramaphosa's inclusion in the ANC leadership team could help to restore the party's image.
This has been undermined by growing popular disillusionment over the ANC government's failure to tackle still widespread poverty and unemployment and over persistent problems of graft, cronyism and mismanagement.
Zuma called for changing a government contracts system that has been criticised for enriching business executives with ANC links, many of them ANC members themselves, and creating a wealthy elite mockingly called the "tenderpreneurs".
"The system of tenders is turning people we have known into something else," he said.
Ramaphosa, now 60, won international renown as a campaigner against apartheid when he led a mineworkers' strike in 1987, and he also helped draft South Africa's post-apartheid constitution before becoming one of the country's most successful and respected businessmen.
He is seen as one of the "cleaner" members of the ANC whose fortunes have come from private-sector business deals and not through government tenders.