Mbeki to meet Zimbabwe political leaders

HARARE (Reuters) - South African President Thabo Mbeki, mediating in Zimbabwe's post-election crisis, will go to Harare on Saturday amid growing optimism a power-sharing deal can be reached between the ruling party and the opposition.

A statement from South Africa's Foreign Ministry said Mbeki would meet President Robert Mugabe and Movement for Democratic Change (MDC) President Morgan Tsvangirai.

ZANU-PF and MDC began talking more than two weeks ago to resolve a crisis that came to a head after the 84-year-old Mugabe was re-elected in a widely condemned June poll boycotted by the opposition.

South Africa's Business Day newspaper, citing unnamed sources, said Mugabe and Tsvangirai would hold make-or-break talks to finalize a deal in Harare on Sunday.

Business Day said it was understood the two were not "too far apart", though the central issues remain unresolved.

Mugabe said on Thursday the talks were going well but dismissed as nonsense media reports about a draft agreement under which Tsvangirai would run the country as prime minister while Mugabe would become ceremonial president.

Business Day said Mugabe and Tsvangirai were said to have been in contact several times during the talks to seek common ground on the delicate issue of power and positions.

The two sides are under heavy pressure to resolve a deepening crisis that has ruined the once prosperous economy and flooded neighboring states with millions of refugees.

DOUBTS REMAIN

Any deal would require a green light from security and military chiefs, powerful figures with wide sway over Mugabe who want to make sure they are not vulnerable to international prosecution when the political dust settles, analysts say.

Steven Friedman, of the University of Johannesburg, had serious doubts ZANU-PF and the MDC were close to a deal.

"The reality is that you've got a military establishment and I think they are really running things," the political analyst told Reuters.

"You've got a military establishment which I think believes it has the power to crush resistance. It had the power to ensure there wasn't a free and fair election."

Should an agreement be reached, it could take at least two weeks to convene parliament and push through expected constitutional changes creating new government posts and implement other aspects of the deal, analysts say.

Even if the two sides manage to settle their differences, investors should remain cautious, said Graham Stock, sub-Saharan Africa strategist for JP Morgan in London. Firm evidence of international backing for any deal should not be the sole basis for financial commitments, he argued.

He said merely co-opting Tsvangirai will not be enough.

"It will take more than that to provide guarantees on property rights and other macro-economic issues," Stock told Reuters.

Nic Borain, a South Africa-based political consultant at HSBC Securities, said sections of the market believe a deal is possible but they were also skeptical.

"I don't think the market believes that the situation is going to work if it's just business as usual," he said.

"I do believe that keeping (Mugabe) on as titular president is not a deal breaker as far as financial markets and other investors are concerned."

Helping secure a settlement before he hosts an August 16 summit in South Africa of regional leaders he has represented in the mediation could be a political coup for Mbeki.

Mbeki has come under intense criticism at home and abroad for not taking a tough line with Mugabe, a policy he argues would only backfire and deepen tensions.

"It's just too good to be true," Friedman said.

"You don't go from a situation where two or three weeks ago people were being killed in the streets for being MDC, then three weeks later you have a nice power-sharing agreement in which everybody agrees to work with each other."

(Additional reporting by Phakamisa Ndzamela and Michael Georgy in Johannesburg; writing by Michael Georgy, editing by Mary Gabriel)