The African National Congress (ANC) was holding high-stakes internal talks on Tuesday about which parties it should approach to form South Africa's next government, with diametrically opposed Marxists and free-marketeers on the menu of options.

After 30 years of dominance since Nelson Mandela led it to power in the milestone 1994 elections that marked the end of apartheid, the ANC lost its majority in last week's election. It remains the largest party but can no longer govern alone.

Voters punished the former liberation movement for high levels of poverty, joblessness and inequality, rampant crime, rolling power cuts and corruption - problems that have held South Africa back and will challenge the next government.

It will have 159 seats out of 400 in the new National Assembly, while the free-marketeer Democratic Alliance (DA) will have 87, the populist uMkhonto we Sizwe (MK) 58, the Marxist Economic Freedom Fighters (EFF) 39 and the socially conservative Inkatha Freedom Party (IFP) 17.

The new parliament must convene by June 16 and one of its first acts will be to choose the nation's president. As things stand, that looks likely to be the incumbent, ANC leader Cyril Ramaphosa, although he may come under pressure to quit or prepare for a succession given his party's poor showing.

A working committee of 27 ANC officials was due to meet on Tuesday to draw up a menu of options to present to the party's National Executive Committee (NEC) on Wednesday.

A major news website published details from three internal ANC discussion documents it said it had obtained, outlining scenarios.

According to one of those documents, the preferred option was a confidence-and-supply agreement in which the ANC would hold executive power, with some positions for the IFP, while the DA would have the upper hand in parliament, holding the Speaker's seat and powerful committee positions.

Under that scenario, the DA and IFP would agree to support the ANC minority government on key votes such as the budget or any confidence motions, in exchange for policy concessions and involvement in the legislative process.

PARTIES DIVERGE SHARPLY

The second-best option, according to the document, was a coalition government incorporating the ANC, DA and IFP. The document said this would risk alienating some ANC supporters and that finding enough common ground on policy would be a challenge.

The least good option, according to the document, was a government of national unity bringing in a much wider array of parties. It said this would carry the risk of instability and collapse, or that one or more parties withdraw, leaving the ANC in effect in a coalition with the EFF and MK parties.

An ANC spokesperson declined to comment on the content of the news report.

An alliance between the ANC and either the EFF or MK has been described as the "doomsday scenario" by the DA, and would be seen as very alarming by financial markets and foreign investors.

The EFF, led by Julius Malema, a firebrand former leader of the ANC's youth wing who broke away from the party, advocates nationalising mines and banks and seizing land from white farmers to redistribute it to Black farmers.

MK, which performed surprisingly strongly especially in Zuma's home province of KwaZulu-Natal, also advocates nationalisations and land seizures, as well as scrapping the constitution and introducing a parliamentary chamber made up of traditional rulers.

The party is seen by many analysts as a vehicle for Zuma to seek revenge on the ANC, his former party, after he was forced to quit as president in 2018 following a string of corruption scandals. He has since become an implacable enemy of Ramaphosa.

The DA presents itself as a champion of business and free-market economics and favours scrapping some of the ANC's flagship Black empowerment measures which it says have not worked.

Often accused of representing the interests of the privileged white minority, the DA rejects that label and says good governance benefits all South Africans.

All of the opposition parties have been vitriolic in their denunciations of the ANC during the election period and inter-party talks are expected to be very challenging.