By Paul Simao
JOHANNESBURG, May 26 (Reuters) - President Thabo Mbeki faces an uphill battle to remain politically relevant in his last year in office after his failure to contain an eruption of violence that has killed dozens of foreign workers in South Africa.
Mbeki, who has seen his power and prestige shrink since losing the ruling ANC leadership to Jacob Zuma in 2007, was already under fire for failing to prevent a crippling power shortage when the mobs went on the rampage this month.
At least 50 people have died -- some were burnt alive -- and more than 25,000 fled to refugee centres. But Mbeki was largely invisible as the xenophobic violence mounted, only addressing the nation on Sunday night, two weeks after the bloodshed began.
"It's unclear now who is running the country," said Frans Cronje, deputy chief executive of the South African Institute of Race Relations. "There needs to be a changing of the guard."
Mbeki's performance has further spooked investors, who fear Zuma and his labour allies will nudge the government to the left and loosen the fiscal restraint that many credit for a nearly decade-long expansion in Africa's largest economy.
South Africa's volatile currency fell sharply last week before Mbeki deployed the army to help quell the violence.
"The rand remains uncertain and the xenophobic violence could spark a political crisis and put into question the legacy of Mbeki's presidency," French bank BNP Paribas said in a recent research note.
There are growing calls for Mbeki to quit or be ousted before his final term ends after the general elections in 2009. Much of the pressure is coming from within the African National Congress and its leftist allies.
Mathews Phosa, the ANC's treasurer general and a top Zuma lieutenant, recently called on the South African president to step down, citing a need for strong leadership in the state presidency.
Zuma is the frontrunner to take over from Mbeki, who is constitutionally barred from running for a third term.
The South African Communist Party also endorsed a move to abort Mbeki's final year. The SACP is in a coalition with the ANC and has seen its influence grow since it backed Zuma for the party leadership.
MBEKI LEGACY
Although he has signalled a desire to have a strong say over the direction of government in the coming year, Zuma has resisted the urge to pluck the keys of the presidency from his rival.
Many analysts play down the likelihood of an internal putsch against Mbeki, noting that Zuma's own future remains murky in the face of a corruption case that could go to trial later this year.
Zuma has been charged with fraud, bribery, money-laundering and other wrongdoing in connection with an arms deal. The Zulu politician has denied the charges but said he will step down as ANC leader if convicted.
It is more likely, observers say, that the ANC will spend the next year working to ensure a smooth transition from the end of the Mbeki era, while continuing with a purge of pro-Mbeki officials from party positions and state-run firms.
"I believe this (the violence) will touch Mbeki's legacy as a particularly low point, but there is very little risk that Mbeki will not finish out his term," said Susan Booysen, an analyst at South Africa's University of the Witwatersrand.
But the degree to which Mbeki can steer government is uncertain amid growing attacks on his policies.
Critics say Mbeki's failure to improve the lot of the poor, especially in the seething townships around Johannesburg, and his refusal to take a hard line on Robert Mugabe's government in Zimbabwe laid the foundation for the attacks African migrants.
An estimated three million Zimbabweans have fled to South Africa, making them the largest immigrant group in a country of about 50 million. But they and other newcomers are accused of stealing scarce jobs and housing and fuelling violent crime.
Rising prices for food, fuel and other basic commodities have pushed tensions to breaking point.
"It would be hard to imagine a more depressing contrast with the leadership of Nelson Mandela," the New York Times wrote in a damning May 24 editorial that lambasted Mbeki for his response to the violence, AIDS and the crisis in Zimbabwe.
Mbeki and his senior officials deny that policy failures were behind the xenophobia and defend the government's economic accomplishments, pointing to the increased access to electricity and housing and expanded welfare grants for 12.5 million people. (Editing by Giles Elgood)
