President Thabo Mbeki finally resigned from office last night, succumbing to the increasingly bitter political struggle within the ruling African National Congress (ANC). Mbeki's resignation came a day after the ANC's ruling body, the National Executive Council (NEC), effectively brought his presidency to an end by recalling him .The move follows a decision by a Pietermaritzburg court a week earlier to set aside the corruption case against Mbeki's one-time-deputy-turned-political-rival, Jacob Zuma, during which the presiding judge pointed an accusatory finger at Mbeki in suggesting that the case may have been politically motivated .

In a nationwide televised address, Mbeki confirmed that he has handed his resignation letter to the speaker of the National Assembly, adding that he would leave his post as soon as a successor was chosen. The outgoing president said he made the decision to go in the interest of party unity, while reasserting his earlier claims that he has not sought to interfere in the judicial process to bring charges against Zuma. "We have never compromised the right of the National Prosecution Authority (NPA) to prosecute or not to prosecute. This applies equally to the painful matter relating to the court proceeding against the president of the ANC, comrade Jacob Zuma," he said.

Dead Man Walking

Mbeki's decision to quit as South Africa's president seven months earlier than the expiration of his second five-year term in office appears to be the penultimate chapter in the increasingly bitter power struggle within the ANC—more specifically, between a faction led by the outgoing president and one led by Zuma and including all the marginalised constituencies within the party.

The president has been living on borrowed time ever since he sought and failed in December 2007 to extend his considerable influence within the ANC beyond his term as the country's president by holding onto the ANC presidency. Despite his best efforts, however, Mbeki lost out to Zuma in the party's leadership election. This was the first time in more than half a century that the position has had to be decided through an election, following weeks of bitter battle that underlined the divisions within the party. Mbeki was allowed to take part in the ballot after convincing the party to change its rules by insisting that its leader and presidential candidate do not necessarily have to be the same person. This was intended to derail the chances of Zuma, whom he dismissed as his deputy back in 2005 following the former's implication in a high-profile corruption scandal. Had he won the ballot, Mbeki was expected to nominate one of his protégés, such as his current deputy Phumzile Mlambo-Ngcuka, Foreign Affairs Minister Nkosazana Dlamini-Zuma, or Defence Minister Mosiuoa Lekota, as the party's presidential candidate, thus ensuring his legacy in the process.

His best-laid plans floundered, however, when Zuma won the ballot instead. The party's members, who never felt any empathy towards Mbeki, seemed only happy to snub him in favour of the popular, if highly flawed, Zuma. However, the final coup de grace on Mbeki's nine-year presidency (which followed another five years as deputy president), was delivered from the most unlikely source, in the shape of High Court judge Chris Nicholson. In setting aside the corruption charges against Zuma on technical grounds without reflecting on his guilt or innocence, Judge Nicholson appeared to share Zuma's belief that the case was part of a strategy linked to the rivalry between himself and Mbeki for leadership of the ANC by agreeing to his claims of a conspiracy. He said Mbeki's dismissal of Zuma as deputy president was unfair and suggested that the timing of the NPA's decision to bring fresh charges against him was "most unfortunate". "This factor, together with the suspension of [chief prosecutor Vusi] Pikoli, who was supposed to be independent and immune from executive interference, persuade me that the most plausible inference is that the baleful political influence was continuing," Nicholson said. With such a damning statement, which could not have been more critical had it came from one of Zuma's allies, Mbeki's fate was effectively sealed. Members of the NEC, which since the ANC's December 2007 national conference has been dominated by Zuma's supporters, were only too happy to deliver the final blow by demanding his departure.

The Caretaker

A former trade unionist and secretary-general of the ANC, Motlanthe was elected as the ANC's new number two back in December 2007. He was subsequently brought into the government by Mbeki as a minister without portfolio in July 2008 at the behest of the ruling party, in an attempt to bridge the growing disconnect between the ANC and the government following Zuma's election as the new party president. Given the latter's continued legal difficulties (with the NPA last week announcing plans to appeal against the latest court decision to set aside the corruption charges against him), the unassuming deputy is now being tipped as potential head of state, in the event that Zuma is convicted on corruption charges.

Outlook and Implications

Mbeki's forced resignation suggests that South Africa is in the midst of uncertain political times. Since the end of minority Apartheid rule and the advent of democracy back in 1994, South Africa has rightly been praised for having one of the most stable political environments in the region, with the ANC remaining the dominant political force.

Mbeki's departure, while predicted by some political observers, appears to have come as a shock to the wider public—including the business community, who have been following the unfolding power struggle within the ANC with growing unease. This is due to the realisation that the country's future political direction is being shaped by a handful of individuals within the ANC, thanks to the current state of political play in South Africa, which sees the former-liberation-movement-turned-ruling power remain the dominant and unchallenged power.

However, the country's political environment has been in a state of flux for the past 10 months, following Zuma's victory over Mbeki in the ANC leadership election. The result was seen as a resounding rejection of the president's overbearing and authoritarian style by the ANC's ordinary members and his failure to address their concerns. The electoral disaster had also turned Mbeki into a lame-duck president, raising questions over the effectiveness of the rest of his term as head of state. Despite both Mbeki and Zuma insisting that they can work together in harmony during the remaining months of the former's presidency, the country had developed two parallel centres of power with two presidents: one of state at Union Buildings in Pretoria and the other at Luthuli House (the ANC's headquarters in Johannesburg), with Zuma and his loyalists now firmly in charge of the party's policy direction.

In such a context, Mbeki's departure is seen as the beginning of the end of political uncertainty, with Zuma now all set to become the country's next head of state. However, there are already speculations that the ANC's decision to effectively sack Mbeki will herald the break-up of the party, with a faction loyal to the now-ousted president leaving the party in time for the next elections.

Analysing the economic impact of the events of the past 48 hours will centre on monitoring key developments as they unfold over the coming weeks. In the short term, however, key economic role-players are expected to stay in office at least until after the general election in the first half of 2009, and Global Insight thus does not foresee any immediate change to economic policy. Nevertheless, markets will be on high alert, analysing each move of the ruling party. The main consequences to emerge from political developments at this stage will feature uncertainty. In a very volatile environment of heightened risk aversion among investors worldwide, markets will be extremely susceptible to any move that could suggest that the rule of law is not adhered to or that the democratic process could be at risk. South Africa is highly dependent on favourable international perceptions to secure much-needed capital flows to finance the large current-account deficit.

Debate on pertinent economic issues such as high unemployment, the fiscal policy stance, and inflation-targeting is, however, expected to intensify as the ANC’s alliance partners come to the fore. In light of this, the reading of the government’s medium-term policy statement on 21 October will be scrutinised for populist trends. All in all, questions pertaining to the future stance of economic policies are only expected to be settled after the 2009 general election.