South Africa's ruling ANC meets to decide Mbeki's fate

JOHANNESBURG (Reuters) - South Africa's ruling party met on Friday to decide whether President Thabo Mbeki should be removed from office, a move that could rattle investors in Africa's largest economy.

Mbeki is popular among investors who praise his pro-business policies. But he is on thin ice with powerful trade unions and other supporters of ANC leader Jacob Zuma, who accuse Mbeki of trying to undermine the man who replaced him as party boss.

Fired as Mbeki's deputy president in 2005 after he was linked to alleged wrongdoing in an arms deal, Zuma defeated his former boss in a bitter leadership contest late last year and is seen as frontrunner to succeed him as head of state next year.

Mbeki is barred by the constitution from a third term as state president.

The move to oust him picked up speed after a judge last week threw out corruption charges against Zuma and said there was high-level meddling in the case. Zuma's camp have branded the prosecution a political witchhunt by Mbeki and his aides.

Mbeki, who has consistently denied he hatched a political conspiracy against Zuma, lashed out at his critics on Friday as the ANC's national executive committee met to discuss his fate. The powerful policy-making body is dominated by Zuma allies.

"It impoverishes our society that some resort to the tactic of advancing allegations with no fact to support these," Mbeki said in a statement issued by his office. He said he was not involved in prosecutors' decision to appeal the Zuma ruling.

Zuma has said he wants Mbeki to serve out the remaining months of his term, but he faces a growing chorus within the African National Congress to force Mbeki to resign or push him out in a non-confidence vote in the ANC-dominated parliament.

"Zuma will have to listen to all viewpoints, but it is unlikely that the NEC will rescue Mbeki," South Africa's Business Day newspaper quoted an unnamed NEC member as saying. The NEC's decision could come as early as Sunday.

Forcing out Mbeki, credited by the business community for policies that have spurred nearly a decade of economic growth, would create uncertainty among investors.

It could prompt the exodus of loyal ministers, possibly including the popular finance minister, Trevor Manuel. And it would further divide the party that has governed South Africa since the end of white minority rule in 1994.

"If there are significant developments with Mbeki resigning and his cabinet following suit, that could lead to high political risk attached to South Africa," said George Glynos, managing director of South Africa's ETM market analysis firm.

There is speculation that a pro-Mbeki faction could split off from the ANC and contest general elections in 2009 separately. Most analysts, however, expect the ruling party to remain intact and win another landslide victory next year.

The ANC consistently wins about two-thirds of the vote in national elections.

(Additional reporting by Gordon Bell; editing by Matthew Jones)