Malema, 31, was found guilty Thursday of "sowing divisions" and “bringing the ANC into disrepute" by insulting President Jacob Zuma and calling for Botswana's democratically elected president to be overthrown.
Malema said he will appeal his suspension. But if the appeal fails, he must leave his position as ANCYL president, a disciplinary committee said in a ruling delivered at the party's Luthuli House headquarters in Johannesburg. Malema remains on full pay pending the outcome of the appeal.
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The ruling was delivered by Derek Hanekom, chair of the ANC's National Disciplinary Committee, who said that youth leaders in the ANC are expected to lead by example and act as good role models for the country's young people.
Five other senior ANCYL leaders also faced disciplinary charges. The youth league's spokesman, Floyd Shivambu, was suspended from the ANC for three years for swearing at a journalist and for accusing the party of associating with imperialists.
Malema, who was reportedly writing exams for a politics degree and did not attend the ruling, previously said he would respect the outcome of the disciplinary hearing.
There were reports of youth league protests Thursday in the city of Polokwane, Malema's home base in Limpopo province.
Separate to the ANC disciplinary charges, Malema is still being investigated for fraud and corruption by the country's public protector — similar to the role of an ombudsman — but the probe is currently on hold due to a lack of funding.
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Malema, who grew up the son of a cleaning lady in Limpopo province, has positioned himself as a champion of South Africa's poor. But he lives a high-flying lifestyle, known for his $34,000 Breitling watch, Mercedes-Benz cars and a mansion in Sandton, Johannesburg's wealthiest neighborhood.
Just a few hours after leading a recent "march for economic freedom" for South Africa's poor and jobless youth, Malema flew business class to Mauritius for a wealthy friend's lavish wedding.
He was once a key ally of President Zuma, and helped bring him to power through the youth league's support. Just three years ago, Malema had said he would kill for Zuma, and the youth league’s 350,000-strong block of voters gave crucial support to lift Zuma to the ANC presidency, ousting Thabo Mbeki and then displacing him as South Africa’s president.
But Malema has since become an outspoken critic of Zuma, and last year was put on probation by the ANC disciplinary committee after being found guilty of criticizing the president.
He has cultivated powerful backers within the ANC, including Nelson Mandela's ex-wife Winnie Madikizela-Mandela.
Malema's supporters did not attend the ANC disciplinary committee's ruling, in stark contrast to the start of hearings in late August, when stone-throwing protesters clashed with police outside Luthuli House.
Some of the hundreds of Malema supporters set fire to T-shirts bearing Zuma’s image, threw rocks and bottles at police and journalists, and chanted “Zuma must go!”
The youth league has recently been pushing for South Africa's deputy president Kgalema Motlanthe to take over from Zuma. Motlanthe served as caretaker president to complete Mbeki's term, before Zuma was elected.
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Erin Conway-Smith is GlobalPost's South Africa correspondent. Follow her on Twitter: @ejcs