Mbeki's cabinet adopted two bills last week paving the way for the end of the Directorate of Special Operations, commonly known as the Scorpions, and the creation of a new unit within the police, South Africa's Sunday Times reported.
The FBI-style unit had been living on borrowed time since Zuma beat Mbeki for the leadership of the ruling African National Congress in December. Zuma's camp accused the Scorpions of engaging in a plot to smear and deny Zuma the ANC top job.
In 2005, the unit raided properties belonging to Zuma and his lawyer as part of their corruption investigation of the politician, who is scheduled to go on trial in August for fraud, bribery and other wrongdoing tied to an arms scandal.
Government spokesman Themba Maseko said the bills dissolving the unit would be tabled in parliament this week and be followed by public hearings, the Times said. The ANC-dominated parliament is expected to ratify the move.
Established by Mbeki in 1999 to fight high-profile corruption cases, the Scorpions have scored successes against organised crime, despite seeing their reputation attacked as a result of the Zuma investigation.
The unit is not part of the police and reports to the National Prosecuting Authority (NPA). The NPA in turn answers to South Africa's Justice Department.
The Scorpions had waged a turf war with the police and were accused of using their power to settle scores, most notably in Zuma's corruption case but also in an investigation of the country's police chief.
Zuma is widely seen as the frontrunner to replace Mbeki, who must leave office in 2009, and Zuma supporters have been purging party and parliamentary bodies of the most pro-Mbeki officials.
The rivalry between the two has stoked investor fears of political instability in Africa's largest economy.
It is unclear, however, whether disbanding the Scorpions will have any bearing on the legal case against Zuma, who has pledged to step down as ANC leader if convicted.
Mbeki fought to save the Scorpions and had the support of the main opposition party, but his ministers were lukewarm to the idea in the face of pressure from the Zuma-led ANC.
The South African leader is due on Monday to release a report of an investigation into the Scorpions that will recommend the unit be retained while criticising the way it operated, the Times said.
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