Ramaphosa, Dlamini-Zuma in tight race to lead South Africa's ruling ANC

[December 16, 2017]  By Alexander Winning and James Macharia

JOHANNESBURG (Reuters) - The African National Congress (ANC), South Africa's only ruler since the end of apartheid, votes this weekend in a race too close to call to replace Jacob Zuma as party leader with the winner also likely to become the next president.

The election is perhaps the most pivotal moment for the ANC in its 23 years of power. Scandal and corruption allegations have tainted Zuma's presidency and the party that launched black majority rule under Nobel Peace Prize laureate Nelson Mandela is now deeply divided, its image tarnished at home and abroad.

The ANC will announce Zuma's successor on Sunday, concluding a bruising leadership battle that threatens to splinter the 105-year-old liberation movement.

The race has been dominated by Deputy President Cyril Ramaphosa, 65, generally favoured by financial markets, and Nkosazana Dlamini-Zuma, 68, an ex-cabinet minister, chairwoman of the African Union Commission and Zuma's ex-wife.

Zuma, whose term as head of state expires in 2019, is backing Dlamini-Zuma to succeed him.

South Africa's rand firmed more than 2 percent after courts ruled senior officials in two provinces seen as supporting Dlamini-Zuma had been illegally elected and could not attend the conference.

Ramaphosa won a majority of the nominations to become leader of the party, but delegates at the Dec. 16-20 conference in Johannesburg are not bound to vote for the candidate their ANC branch nominated, meaning it is unclear if he will actually win.

The ANC's National Executive Committee, a decision-making group of senior keaders, met before the conference began and decided that barred delegates could not vote at the conference.

"We don't want to contaminate the conference... They will not vote on any matter," ANC Secretary General Gwede Mantashe told reporters.

ANC Youth League leader Collen Maine, who backs Dlamini-Zuma, said 122 delegates would be prevented from voting at the conference following the ruling by the courts. "That is not significant," Maine told Reuters.

At the meeting venue, delegates in T-shirts in the gold and green colors of the ANC sang party songs and danced, with many waving party flags while women rent the air with ululations.

TIGHT CONTEST

To his supporters, Ramaphosa's business success makes him well-suited to the task of turning around an economy grappling with 28 percent unemployment and credit rating downgrades.

"Early signs of a win for Cyril Ramaphosa, the more investor-friendly option, have provided support for the rand," John Ashbourne, Africa economist at Capital Economics, said.

"But while Mr. Ramaphosa is popular among party members, the result will be decided by political insiders, who may opt for his leftist opponent, Nkosazana Dlamini-Zuma."

Ramaphosa has recently stepped up criticism of Zuma's scandal-plagued government, while Dlamini-Zuma has said her priority is to improve prospects for the black majority.

South Africa's Deputy President Cyril Ramaphosa gestures at an election rally of the ruling African National Congress (ANC) in Port Elizabeth, South Africa April 16, 2016. REUTERS/Mike Hutchings/File Photo

He is expected to be backed by ANC veterans, labor unions and civil society organizations. In contrast, Dlamini-Zuma is seen as a fierce campaigner against racial inequality whose hostility to big business has rattled investors in South Africa.

"She has not made corruption the only pillar of her campaign, because the most critical issue in South Africa is this huge inequality," said Carl Niehaus, a key member of Dlamini-Zuma's campaign.

Growth in Africa's most industrialized economy has been lackluster for the last six years, and the jobless rate is near record levels. Analysts say the ANC leadership battle has made it hard to reform the economy and improve social services.

"The outcome is difficult to predict. This creates considerable uncertainty that is reflected in significantly increased volatility for the rand," Elisabeth Andreae, analyst at Commerzbank, said in a note.

ZUMA SCANDALS

In a move likely to please the ANC rank and file, Zuma announced hours before the conference kicked off that South Africa would raise subsidies to universities to 1 percent of GDP over the next five years from nearly 0.7 percent at present.

Speaking at a breakfast of businessmen and politicians at the venue of the ANC conference, Finance Minister Malusi Gigaba said South Africa's government would take "necessary tough decisions" to stabilize public debt and grow the economy.

On Friday evening, Zuma cracked jokes at an ANC dinner and said that leading the party had "been a worthwhile experience", while adding he looked forward to stepping down. He is expected to make a speech to launch the conference.

The 75-year-old has denied numerous corruption accusations since taking office in 2009 and has survived several no-confidence votes in parliament.

Zuma has faced allegations of undue influence in making cabinet appointments and awarding state tenders to his friends, the Gupta family. Zuma and the Guptas have denied any wrongdoing.

"People can't wait to see his back," political analyst Prince Mashele said in a newspaper opinion piece.

(Additional reporting by Olivia Kumwenda-Mtambo; Writing by James Macharia; editing by Mark Heinrich)

[© 2017 Thomson Reuters. All rights reserved.]

Copyright 2017 Reuters. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.