More than a third of South Africa?s cabinet stepped down on the day before, after President Thabo Mbeki resigned, deepening the biggest political crisis since the end of apartheid.

The list of resignations included respected Finance Minister Trevor Manuel, immediately shaking markets, but they recovered when his office said he was ready to serve under a new president. The resignation of 10 ministers and the deputy president out of a cabinet of 30 followed Mbeki?s decision on Sunday to step down after his ruling African National Congress withdrew its support.

The demise of Mbeki was the climax of a long and bitter battle with Jacob Zuma ? who toppled him as ANC leader in December ? which has seriously split the formerly monolithic party. Parliament is expected to appoint deputy ANC leader Kgalema Motlanthe as interim president tomorrow, until a general election next year which Zuma is widely expected to win. Mbeki?s resignation followed accusations of meddling in a long running graft case against his rival.

Treasury spokeswoman Thoraya Pandy said Manuel had resigned as a member of the cabinet and felt ?duty bound? to do so as he served at the pleasure of the president, and President Mbeki had resigned. ?However, the minister has indicated a strong willingness to assist and to serve the new administration in whatever capacity they may ask of him.?

The rand, which had tumbled on first news that Manuel was stepping down, regained its losses. The Top-40 index of blue-chip stocks also recovered most ground lost after the resignations were first announced. Central bank governor Tito Mboweni will also stay on, his spokeswoman said. An internal South African Revenue Service memo to staff, seen by Reuters, said Manuel would not leave office and appealed to them to remain calm. The SARS is part of the Treasury.

Several analysts criticised the way in which Manuel?s resignation was initially announced without mentioning his willingness to serve under another president. Ratings agency Fitch also expressed concern over the way the resignations were handled. ?This uncertainty is definitely unhelpful,? Fitch head of Middle East and Africa Richard Fox told Reuters. ?But the strength of South Africa is that its institutions are strong and the Treasury is larger than one person. If Manuel was to go, we would not take any immediate ratings action.? Nevertheless the resignations as a whole are likely to raise investor fears of political instability in Africa's biggest economy.

<B>Gordon BELL</B>