JOHANNESBURG South African President Thabo Mbeki on Saturday accepted a demand from his own party to resign, effectively ending a nine-year rule marked by economic prosperity but marred by allegations of abuse of power.
The African National Congress's decision to remove Mbeki, favored by investors for his pro-business policies, capped years of infighting sparked by his 2005 firing of former deputy president Jacob Zuma in a corruption scandal.
Last week a judge dismissed the graft charges against Zuma, now the ANC leader, and suggested there had been high-level political involvement in the case. The ruling spurred pro-Zuma militants within the party to demand Mbeki's head.
Loyalists fought to save Mbeki's presidency but could not sway the party's national executive committee, a key policy-making body stacked with his enemies. It announced his removal in a dramatic press conference outside Johannesburg.
"He didn't display shock or any depression. He welcomed the news and agreed that he is going to participate in the parliamentary process," ANC Secretary-General Gwede Mantashe said as he announced the party's decision.
A few hours later Mbeki announced he would accept his fate.
"Following the decision of the National Executive Committee of the African National Congress to recall President Thabo Mbeki, the president has obliged and will step down after all constitutional requirements have been met," the presidency said in a statement.
A spokesman for Mbeki later told Reuters that the South African leader had decided not to attend the 63rd session of the United Nations General Assembly in New York next week. He had been scheduled to leave on Saturday.
MANUEL TO STAY
The decision to remove Mbeki must be ratified by parliament, a formality given the ANC's two-thirds majority in the assembly.
The resignation may raise political instability in Africa's economic powerhouse 14 years after its transition from the end of white minority rule, although a smooth process to replace him, and reassurances on policy, will ease fears.
Mantashe said the ANC would ask Mbeki's cabinet ministers, including Finance Minister Trevor Manuel -- who is widely respected by markets -- to remain in their positions in the transition period for the sake of stability.
Manuel's office told Reuters he would not step down -- a decision that should calm some investors fears.
Mbeki, who has ruled South Africa since taking over from Nelson Mandela in 1999, was due to leave office in 2009.
He lost the leadership of the ANC to Zuma last year in a bitter leadership battle that further divided the party.
Zuma, popular with the left wing of the ANC and its trade union and communist allies, is the frontrunner to succeed Mbeki. It was unclear whether he would immediately step into the post. Zuma would first have to enter parliament and the cabinet.
Deputy President Phumzile Mlambo-Ngcuka might have assumed the presidency but she has signaled she will resign with Mbeki. Cabinet ministers and the speaker of parliament follow in the succession line.
It is generally expected that parliament, which is dominated by the ANC, will elect a new president within 30 days. Baleka Mbete, speaker of parliament and a Zuma loyalist, has been mentioned as the most likely person to lead the transition.
"If you have the continuity of the cabinet staying largely intact I would not expect a major market reaction," Citigroup strategist Leon Myburgh said.
"But you will have to see how individuals react ... key decision-makers like Finance Minister Trevor Manuel will be key to how the market reacts."
Mbeki and Manuel have presided over the country's longest ever period of economic growth -- a decade.
But the country's powerful trade unions have lambasted his government for putting the interests of the business community and the rich ahead of common people, millions of whom still live in poverty.
The ANC's leftist allies also accused Mbeki and his aides of plotting to smear Zuma and derail his hopes of succeeding Mbeki. The South African leader has consistently denied any involvement in the prosecution.
"We welcome the decision," said Patrick Craven, spokesman for the Congress of South African Trade Unions, the largest labor federation. "It's very important that we ... refocus government on key developmental priorities."
Mbeki's ouster comes just a week after one of his greatest triumphs -- mediating a power-sharing deal in neighbor Zimbabwe that should end years of political and economic crisis.
(Writing by Paul Simao and Gordon Bell; editing by Dominic Evans)