S. Africa's Mbeki agrees to party call to resign

South African President Thabo Mbeki has agreed to step down after the ruling African National Congress asked him to resign, his office said yesterday.

The ANC's decision to remove Mbeki, who was favoured by investors for his pro-business policies, could raise political instability in Africa's economic powerhouse 14 years after its transition from the end of white minority rule.

But a smooth process to replace him may calm investor fears.

"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.

The ANC's National Executive Committee, its top decision-making body, earlier decided to recall the president following years of infighting since his decision to fire his then deputy Jacob Zuma in 2005.

"After a long and difficult discussion the ANC decided to recall the President before his term of office expires," ANC secretary-general Gwede Mantashe told a news conference.

The decision must now be ratified by parliament, which should be a formality, given the ANC's two-thirds majority. 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.

Zuma, who is popular with leftists within the party and with its trade union and communist party allies, is the frontrunner to succeed Mbeki.

It was unclear whether he would immediately step into the breach left by Mbeki. He would first have to be appointed to parliament and the cabinet.

Deputy President Phumzile Mlambo-Ngcuka could assume the presidency but she has signalled 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, the speaker of parliament and a Zuma loyalist, has been mentioned as the most likely one to lead the transition.

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.

"If you have the continuity of the cabinet staying largely intact I would not expect a major market reaction," Citigroup strategist Leon Myburgh said.