By Mfuneko Toyana

PRETORIA (Reuters) - Urban South Africans dealt the ANC its biggest political blow since the end of apartheid on Thursday, knocking the ruling party off its perch in three cities as voters vented anger at corruption, high unemployment and poor public services.

The African National Congress (ANC) - which ended white-minority rule when it won power in the first democratic national election in 1994 - still held a big lead in the overall count in nationwide municipal elections.

But it was trailing the opposition Democratic Alliance (DA) in Port Elizabeth, which it has previously held virtually unopposed for the last two decades. The ANC was also unlikely to make it to a 50 percent outright majority in the capital Pretoria and economic-hub Johannesburg.

A significant loss of support for the ruling party in these areas could mark a watershed in South African society and politics as the country shifts from what has effectively been a one-party system in the era immediately post-apartheid.

It could reshape the political landscape ahead of the 2019 national election, and may also embolden President Jacob Zuma's rivals within the ANC to challenge him.

The municipal vote comes as Africa's most industrialized country teeters on the edge of a recession after a string of corruption scandals surrounding Zuma.


The ANC failed to win Zuma's hometown of Nkandla in Kwa-Zulu Natal province, a personal blow to Zuma, where the Inkatha Freedom Party retained its hold on the region.

Many ANC supporters are switching allegiances to the DA, bolstering its attempts to attract black voters and shake off its image of a party that chiefly serves the interests of the minority white community.

With 85 percent of the vote counted, the ANC led in the national count with 53.5 percent at 1830 GMT, against 27.5 percent for the DA and 7.5 percent for the left-wing Economic Freedom Fighters. Final results are expected by Friday.

The DA, which last year elected its first black leader, Mmusi Maimane, was ahead in Johannesburg and in Nelson Mandela Bay, the area named after the anti-apartheid hero who led the ANC to power. It includes the city of Port Elizabeth.

The DA had an unassailable lead, almost 69 percent of the vote, in Cape Town, the only big city currently not run by the ANC.


The ANC was dominating most of the countryside, long a key area of its support, underscoring a widening political divide between urban and rural South Africa.

"The ANC vote has held up well in rural areas but fallen away sharpest in urban areas, as expected. The ANC is therefore becoming a party of the rural vote," Nomura analyst Peter Attard Montalto.

The ANC had 42.9 percent of the votes in Tshwane municipality against the DA's 42.7 percent after half the votes were tallied.

In Johannesburg, the opposition party's lead had been trimmed to 42.09 percent to 42.02 percent for the ANC, with 47 percent of the votes counted. In Nelson Mandela Bay it led with 49.5 percent versus 39.2 percent, with 94 percent of votes in.

ANC officials in Nelson Mandela Bay cried foul and said it was lodging a complaint about 500 dumped ballot papers found there with votes marked for the party.

Opponents say defeat in a region named after the ANC's liberation hero would be an embarrassment for the ruling party.


The Economic Freedom Fighters (EFF), which is led by Julius Malema, Zuma's one-time protege and a former ANC youth leader, is participating in only its second election and was running a distant third in the votes counted.

It is, however, winning some support from voters frustrated about inequality in country where blacks make up about 80 percent of the population of 54 million, but ownership of land and companies remains mostly in the hands of whites, who account for about 8 percent of the population.

The rand currency and government bonds firmed on Thursday, boosted by the smooth running of the elections.

Many South Africans who queued up to vote across the country said they were worried about Zuma's performance and the state of the economy.

Zuma survived an impeachment vote in April after the Constitutional Court said he breached the law by ignoring an order to repay some of the $16 million in state funds spent on renovating his private home in Nkandla.

In December, he rattled investors after changing his finance minister twice in a week, sending the rand plummeting. Zuma has said he would repay some of the funds spent on his home.

(Additional reporting by Nqobile Dlula and Tanisha Heiberg in Pretoria, Joe Brock in Port Elizabeth, Wendell Roelf in Cape Town; Writing by James Macharia and Ed Stoddard; Editing by Larry King)