* Emerging party controls three of four biggest cities
* Nov 20 municipal vote shunned by ex-rebel group Renamo
* Renamo clashes with army have alarmed foreign donors
By Manuel Mucari
MAPUTO, Dec 4 (Reuters) - The opposition Mozambique Democratic Movement (MDM) has won three of the nation's four largest cities in local elections, emerging as a credible challenger to the ruling Frelimo party for presidential and parliamentary polls due next year.
Besides retaining the mayorships of the ports of Beira and Quelimane in the Nov. 20 municipal vote, MDM gained control of the northern city of Nampula in a re-run on Sunday, held following ballot errors in last month's polling.
The results confirm MDM's growing support while President Armando Guebuza's Frelimo grapples with security and governance problems, as well as public frustration at slim pickings from a foreign mining investment boom that has made Mozambique one of Africa's fastest-growing economies.
Former liberation movement Frelimo has ruled since independence from Portugal in 1975 and won every election after the 1992 end of a 16-year civil war ushered in multi-party politics.
Despite losing the three major cities, Frelimo fended off a strong MDM challenge in the capital, Maputo, to maintain its dominance in most of the nation's 53 municipalities.
In a public statement late on Tuesday, Frelimo conceded victory to the MDM candidate in Nampula, Mahamudo Amurane.
"We lost the battle but not the war," Frelimo spokesman Damiao Jose said. MDM had declared Nampula "liberated from Frelimo's domination", amid celebrations by its supporters.
MDM's electoral chances were boosted by a decision by former rebel group Renamo, the largest opposition party since the end of the 1975-1992 war, to boycott the Nov. 20 elections.
Renamo, whose leader Afonso Dhlakama is hiding in central Mozambique after sporadic clashes since April between his armed partisans and government forces, is demanding reforms to an electoral system it says Frelimo unfairly dominates.
It also accuses the ruling party of running the country's defence forces as its own political militia.
The local elections were held across the southern African nation despite fears Renamo supporters might seek to disrupt them.
RENAMO SEEN WEAKER
With Renamo looking like a fading political force, MDM, led by Beira mayor Daviz Simango, is showing itself to be an increasingly strong opponent to Frelimo for next year's general elections in mid-October.
"If Renamo rejoined the political process ahead of national elections in 2014, it could split the opposition vote," said Robert Besseling, Senior Africa Analyst for IHS Country Risk.
"However, high turn-out in MDM strongholds and existing MDM party organisations across the country indicate that the MDM is likely to replace Renamo as the official opposition in 2014."
Guebuza has said he will not stand for a third term in 2014 after completing two successive mandates, but Frelimo has not yet announced its presidential candidate, raising fears of political in-fighting leading up to the vote.
The sporadic armed clashes in the centre and north of the country this year have prompted calls from the United States and other major donors for Frelimo and Renamo to settle their differences through peaceful negotiations.
Suspected Renamo guerrillas raided a police post and looted a medical centre at Tica, 75 km (45 miles) northwest of Beira, late on Tuesday, the latest in several attacks that have killed 10 people in the last six weeks, the defence ministry said. (Reporting by Manuel Mucari; Writing by Pascal Fletcher; Editing by Ed Cropley and Sonya Hepinstall)