UPDATE 3-S.Africa's ruling party denies split after Mbeki

(Edits, retops with ANC statement)

By Paul Simao

JOHANNESBURG, Sept 30 (Reuters) - South Africa's ruling ANC denied on Tuesday that it was about to split into rival factions after the leader of the richest province resigned in protest at the ousting of President Thabo Mbeki.

Mbeki's resignation a week ago and replacement by Kgalema Motlanthe has fuelled speculation that officials loyal to the former president could form a breakaway faction of the African National Congress.

"The ANC takes notes of the reports in the media on the imminent formation of a new party. These reports have no face to them and are denied by people reported to be spearheading such a formation," the party said in a statement.

Respected Finance Minister Trevor Manuel also played down talk of a split, although he said more officials loyal to Mbeki were likely to resign. So far, no officials have defected from the ANC.

Mbhazima Shilowa, premier of Gauteng province, where both the business hub of Johannesburg and the state capital Pretoria are situated, resigned on Monday, saying he could not support the way the party forced out Mbeki before the end of his term. Other pro-Mbeki state premiers were also thought to be considering whether to quit. Mbeki stepped down after a judge suggested he had meddled in a graft case against arch rival Jacob Zuma, who ousted him as ANC leader in December.

GRAFT CASE

Zuma is expected to win the presidential election next year, but prosecutors on Tuesday filed an application to appeal against the court ruling throwing out the corruption case against him.

The long struggle between Mbeki and Zuma has undermined the ANC's traditional unity and plunged South Africa into its biggest political crisis since the end of apartheid.

Manuel resigned with other cabinet ministers after Mbeki stepped down, briefly rattling financial markets, before he made clear he would serve the next president. Several other ministers were also reappointed by Motlanthe but Mbeki loyalists stayed out.

Asked about the Gauteng premier's resignation on the BBC Hard Talk programme, Manuel said: "I think probably over the next two weeks or so there would be a few resignations like this."

He added: "There is likely to be some steadying of the ship over the next period and as that happens individuals will choose to depart."

The ANC, previously known for its internal discipline, has ruled since the end of apartheid in 1994. Many analysts believe it still enjoys deep loyalty even from Mbeki supporters and any break-up is a distant prospect. Manuel said the government's economic direction would not change under either Motlanthe or Zuma, who have both sought to reassure investors that they will not abandon Mbeki policies that nurtured South Africa's longest period of growth.

Some investors are uneasy about a Zuma presidency for fear that his strong backing by trade unions and the small but influential Communist Party will push policy to the left.

The rand weakened last week during the political crisis.

It slumped again by about 4 percent late on Monday due largely to the global financial crisis before recovering somewhat on Tuesday, but it remained under pressure.

"There has obviously been contagion from the sub-prime crisis, but there is some political risk factored in," said Colen Garrow, an economist at Brait Merchant Bank.

"The uncertainty has weighed on the markets ... (but) it is a peripheral factor." (Additional reporting by Gordon Bell and Paul Simao; Writing by Barry Moody; Editing by Michael Georgy and Matthew Tostevin)