The election of Jacob Zuma as leader of South Africa's ruling African National Congress is a healthy sign of democratic progress in a country that is a model for Africa. That is the good news. The former liberation movement has long denied its internal divisions. Now it has held a contested election for the leadership and Thabo Mbeki, the incumbent, has been defeated. That should be good for democracy in a state where the opposition is weak, and the ANC too dominant.

The bad news is that the split heralds a period of profound uncertainty for South Africa, with a potential for confrontation and deadlock between Mr Mbeki, as state president, and Mr Zuma. Bitter personal rivalry since Mr Mbeki sacked Mr Zuma as his vicepresident in 2005 threatens to de-stabilise the government and disrupt the longest period of economic growth since the second world war.

Much will depend on the ability of the two rivals to co-operate for the good of the country. At such a critical stage in South Africa's development, institutions are far more important than individuals.

Mr Mbeki must recognise that the vote is a rebuke for his style of government, his aloofness and his distance from ordinary party members. He has failed to demonstrate his understanding of the social crisis in South Africa behind the positive macroeconomic performance. The country's rural heartland is suffering from the combined effects of HIV/Aids and unemployment, officially put at 25 per cent. South Africa's economic growth has not been fast enough to meet the expectations of the black majority for land and jobs. That is not Mr Mbeki's fault, but he has seemed deaf to the consequences.

The ball is now in Mr Zuma's court. He has shown he has the popular touch to engage the people. He has demonstrated his capacity as a peacemaker and as a man capable of uniting the diverse sections of South African society. But if he behaves as a pure populist, he will kill the golden goose that is South Africa's thriving economy.

Should investors worry? Mr Zuma may have won the ANC vote with the backing of disaffected trade unions and the Communist party, but he is no radical leftwinger. Much will depend on the advisers he chooses, for he has yet to reveal any clear programme of his own.

Before he can run for state president - in 2009, when Mr Mbeki must stand down - he has to disprove the charges of corruption that he still faces. He must demonstrate that he believes in good government, not just power. That will be the test of his fitness for the highest office.