South Africa?s parliament has appointed ruling ANC deputy head Kgalema Motlanthe as interim president of a country gripped by the most serious political crisis since the end of apartheid.

Thabo Mbeki resigned on Sunday as head of state after the ANC withdrew support following a judge?s suggestion of official interference in a graft case against party leader Jacob Zuma, widely expected to become president after next year?s election.

Almost one-third of South Africa?s cabinet stepped down on Tuesday out of loyalty to Mbeki, who presided over South Africa?s longest period of growth. The political upheaval has raised concerns that the worst divisions in the history of the ruling African National Congress will deepen.

Mbeki did not attend the swearing in ceremony of his successor, parliament officials said, in a sign of the political tensions. «Mbeki was invited but has declined,» said an official in parliament?s protocol office. South African parliamentary speaker Baleka Mbete, was appointed state deputy president, officials said. ?The chief whip said so this morning,? Zizi Kodwa, an official in the presidency told Reuters.

Mbete will replace Phumzile Mlambo-Ngcuka, who resigned on Tuesday together with 10 other cabinet ministers out of loyalty to Thabo Mbeki, who stepped down as president on Sunday.

The resignation of Finance Minister Trevor Manuel shook markets but they partially recovered when he said he would be happy to serve under the new president.

Motlanthe, a left-leaning intellectual and Zuma ally, is widely respected by both the radical leftists and business tycoons within the African National Congress.

A former student activist and trade unionist, Motlanthe is seen as a figure who could help heal rifts in the ANC and calm nerves over South Africa?s turmoil.

The resignations have raised questions about whether the party which was united in the struggle against apartheid can survive as a single bloc. The ANC is not splitting, said one of the outgoing ministers after Mbeki held his last cabinet meeting.

?Rumour-mongering?

?I am not aware of any discussions to create a split inside the ANC. Until such time that such a thing happens, it will remain in the realms of speculation and rumour-mongering,? Essop Pahad, a close aide of Mbeki and outgoing minister in the presidency, told a news conference. The departure of Mbeki was the climax of a long and bitter battle with Zuma, who toppled him as ANC leader last December.

Their power struggle has seriously damaged the formerly monolithic party and overshadowed pressing issues such as widespread poverty and crime and an AIDS epidemic ravaging millions.

Motlanthe, who prefers to stay out of the limelight, also has anti-apartheid credentials. In 1977 he was sentenced to 10 years imprisonment and was jailed on Robben Island with Nelson Mandela and Zuma under the racist apartheid regime.

Policy changes under Motlanthe in the short interim period would be unlikely but foreign investors eager for stability and a continuity of policy in Africa?s biggest economy will be watching closely for clues on the ANC?s future policy.

Zuma, a populist leader, is in a difficult position. He is trying to reassure foreign investors he would not stray from business-friendly economic policies but is under pressure from left-leaning union allies to alleviate poverty through more government spending.

Political analysts say that while market nerves would be steadied if Manuel stayed on as finance minister, investors will be closely watching to see if left-wing elements in the ANC put pressure on him to change economic policy.

REACTIONS

Mugabe devastated

■ Zimbabwe?s President Robert Mugabe said the resignation of South African President Thabo Mbeki was devastating, state media reported yesterday.

Although Mbeki was frequently criticised for taking a soft line with Mugabe in a year of negotiations, he managed earlier this month to broker a power-sharing deal to end Zimbabwe?s deep political crisis.

But Mugabe and opposition leader Morgan Tsvangirai are still deadlocked over cabinet posts.

«It?s devastating news that President Thabo Mbeki is no longer the President of South Africa, but that is the action of the South African people,» the state-controlled Herald newspaper quoted Mugabe as telling reporters in New York, where he is attending the United Nations General Assembly. «Who are we to judge? But it is very disturbing,» he added.

Mugabe met South African Foreign Affairs minister Nkosazana Dlamini-Zuma on the sidelines of the summit to discuss political events in South Africa, the Herald reported.

Tsvangirai?s Movement for Democratic Change says it does not expect Mbeki?s resignation to affect the negotiations.