In a report titled "South Africa: Mangaung Madness" consultants said: "The likely retention of the Zuma status quo is the problem but the alternative (Anyone But Zuma) looks no better."
The so-called ABZ faction is a loose alliance of anti-Zuma party members, who have campaigned for wholesale change in the party’s leadership and for deputy president Kgalema Motlanthe to replace Zuma as ANC president.
"We believe Jacob Zuma will be re-elected leader. A quantitative assessment based on branch and province views also supports this, albeit by a moderately close margin of 54% to 46%," said Peter Montalto, emerging markets strategist and one of the authors of the report.
The report argued that characterising the standoff between the Zuma and Motlanthe camps as a "grand battle" was wrong.
"We think this battle is less significant than it seems thanks to a poor campaign by ABZ and little that holds them together. The Zuma camp by contrast has a much more aggressive operation," it said, adding: "The example of Zuma toppling Mbeki however in 2007 teaches us to be cautious, however."
According to the report, there is a possibility that Kgalema Motlanthe, who is the most likely candidate to challenge Zuma for ANC presidency at Mangaung, will fall by the wayside in favour of Cyril Ramaphosa as deputy president, and that there may even be a chance that Ramaphosa will become president of the country in 2014.
"Future succession battles look equally probable under both leaders, driven by the quest for power and influence even as the ANC slowly loses popularity more generally given its inability to deliver services and boost growth and development," it said.
Financial impact of Mangaung
The report, which focused on the potential economic impacts of the ANC’s elective conference, said that a continuation of the status quo would involve further erosion of competitiveness and suppressed potential growth, which in turn would lead to further downgrades.
Read the full report here.
After successive downgradings by the major ratings agencies and widespread unrest in the mining sector, the rand has dropped to a three-year low against the dollar.
"The direct fiscal impacts in the short run will likely be limited but over the medium run could accumulate into a more worrying picture," said the report.
Montalto said he expects ratings agency Fitch to downgrade South Africa's sovereign rating in January, and sees some possibility that Standard & Poor's and Moody's, may do so again, depending on the policy outcomes from the Mangaung conference.
"The ANC’s policy resolutions are so couched in generalities and are so high level that it may be hard for the agencies to have enough evidence to be able to see there have been definite policy shifts and so not downgrade," said the report.
The report said labour sector unrest in the country is both structural and long-lasting and warned that government would have to deal with another round of similar strike action next year.
"The government's response to the labour issues of this year has been woeful," it said. "Some blame that on Mangaung looming on the horizon, but we think it is thanks to more general political constraints in the tripartite alliance. Next year should show which view is right."
In what is sure to be a controversial construction, the report divides the ANC into three separate factions – left wing, centrist/centre left and tenderprenuer/cadre deployee.
Montalto told the M&G that while this construction may not be perfect, it is a "slightly more interesting way of looking at [the party]".
"There is a large segment of people who are basically non-ideological and who are in the ANC because it is the party in power, it gives access to tenders, and they want to get government or provincial jobs," he said, adding "That's an important mind-set in the ANC that does drive the policy debate."
Montalto said that in recent policy discussions on nationalisation, both the left and centre-left factions were against nationalisation while the non-ideological faction – the tenderpreneurs – were in favour of it.