* Motlanthe takes the plunge against contest favourite Zuma
* Deputy president concerned about democracy, transparency
* No dramatic policy shifts seen, but mining tax an option
By Peroshni Govender and Ed Cropley
JOHANNESBURG, Dec 13 (Reuters) - South African Deputy President Kgalema Motlanthe will challenge President Jacob Zuma for leadership of the ruling African National Congress (ANC) next week, spicing up a one-sided race for the top political position in Africa's biggest economy.
Motlanthe aide Thabo Masebe ended months of speculation about the internal ANC election in the city of Bloemfontein, saying Motlanthe would enter the contest after winning the backing of two of South Africa's nine provinces.
"I understand he will contest the presidency," he told Reuters on Thursday.
The 70-year-old Zuma remains firm favourite to win re-election in Bloemfontein as head of the ANC, a position that puts him in pole position to secure a second five-year term as state president in an election in 2014.
The ANC, which has run South Africa since the end of apartheid in 1994, retains the strong emotional support of most of South Africa's 80 percent black majority, making a defeat at the ballot box any time this decade highly unlikely.
Motlanthe has not expanded on why he will oppose Zuma. But he has spoken of restoring democracy and openness to Nelson Mandela's 100-year-old liberation movement, whose image has suffered under the scandal-plagued Zuma.
Zuma won wide support from ANC branches in five provinces, meaning that, barring any last-minute mishaps, he should emerge again as party leader in Bloemfontein.
The previous ANC election, in the city of Polokwane in 2007, was a riotous affair at which Zuma ousted then-president Thabo Mbeki, creating rifts that divide the party to this day and hamper its ability to run a sophisticated emerging economy.
Mindful of the Polokwane chaos, which included delegates throwing chairs and baring their buttocks at the vanquished Mbeki, the ANC's overseers are keeping a tight lid on the vote, including even withholding the names of leadership candidates.
"We're not at liberty to tell you the nominees," party election commission chairman Mochubela Seekoe told a news conference, infuriating reporters crammed into the lobby of the ANC headquarters in downtown Johannesburg.
Motlanthe is also running to retain his current job of deputy leader, but faces a strong last-minute challenge from Cyril Ramaphosa, an inspirational anti-apartheid union leader and now South Africa's second-richest black businessman.
Apart from the votes, the four-day conference, which starts on Sunday, will chart a broad policy course for the next five years, reaffirming the primacy of the state in guiding the economy with a mixture of direct intervention and regulation.
Nationalisation of the mines - championed by expelled ANC youth leader Julius Malema - has been dropped as a viable course, but the party may still opt to back a "resource rent" mining tax, already labelled "unnecessary and unwise" by the outgoing chief executive of the mining giant Anglo American .
However, the party still appears unwilling to risk upsetting its grass roots with measures to boost economic growth, forecast at a lukewarm 2.5 percent this year.
The economy was growing by more than 5 percent in the years leading up to the 2008 global economic crisis and has struggled to return to those levels under Zuma. Its industries have been shedding jobs as labour costs have outstripped those of emerging market peers whose workers are often much more efficient.
Economists have said for years that the government needs to ease the regulation of a labour market ranked as one of the most restrictive in the world, and have urged it to reduce the role of the state in the economy.
"Overall, the ANC collectively still does not appear to be in the right place to take the politically very difficult steps to ensure a boost to potential growth," investment bank Nomura said in a research note.
Nor are business leaders the only ones worried at the prospect of seven more years of Zuma, who in recent weeks has been embroiled in a storm of criticism over a 240 million rand ($28 million) state-funded upgrade to his private home.
This week, the South African Council of Churches, one of the main players in the struggle against white-minority rule, accused the ANC of moral decay and abandoning the goal of building a non-racial democracy from the ashes of apartheid.
Commentators have also noted the coincidence of looming party in-fighting in Bloemfontein with the 94-year-old Mandela's admission to hospital last week with a lung infection.
"It is impossible to separate the growing unease about many aspects of South African politics from the failing health of the universally loved founding father of the country," Cape Town-based analyst Nic Borain said.