Six months pregnant, Elizabeth Kganyo was determined to cast her vote, even if it meant standing in a sun-baked queue for hours on end. "I was so excited because it was the first time," she recalls, sitting on an upturned plastic basket outside her shack in Diepsloot, north of Johannesburg. "Everybody wanted to vote. Everybody was happy."

South Africa held its first multiracial election 20 years ago on Sunday, defying bombs, bluster and the threat of civil war to conjure a spectacle of voters in long, winding lines that ravished the world. But for Kganyo, like millions of others who put a cross beside the face of Nelson Mandela, those days of miracles and wonder are a fading memory. "It's not the same now. We're not happy to vote any more. It's not like the first time."

Next month, South Africans return to the polls for the first election since Mandela's death and the first in which the so-called "born free" generation – those whose lives began after racial apartheid – are eligible to vote. The African National Congress is in no doubt of a fifth consecutive victory on 7 May but faces an unprecedented long-term challenge both on the streets and at the ballot box.

Two decades of modest economic growth have left the white minority better off than ever but half of young black people without a job. South Africa is one of the most unequal societies on Earth and reaping a whirlwind of frustration and unrest. One expression of this is in tyre-burning, stone-throwing township protests that could point towards future social instability. Another is the rise of a militant new party that claims to be the true inheritor of the ANC's radical legacy.

The Economic Freedom Fighters (EFF) is bringing a flavour of Latin American socialism to an otherwise somewhat sterile election. It draws thousands of people to its rallies wearing an instantly recognisable motif, a red beret, as sported by the late Venezuelan president Hugo Chávez. Indeed, its "commander in chief", charismatic firebrand Julius Malema, travelled to both Venezuela and Robert Mugabe's Zimbabwe to hone his populist, anti-western rhetoric. The EFF regards forgotten places such as Diepsloot, a sprawling, impoverished and violent settlement, as fertile territory for recruiting angry young people who feel betrayed by the ANC.

Julius Malema, president of South Africa's Economic Freedom Fighters, greets the local community in Ngcingwane. Photograph: Gianluigi Guercia/AFP/Getty Images

Sprouting on farmland in the 90s, Diepsloot ("deep ditch" in Afrikaans) is a largely post-apartheid creation and most of its 200,000 residents blame the ANC for their dismal conditions. Amid this sea of shacks, many constructed from corrugated iron haphazardly bolted together, piles of rubbish go uncollected and acrid water runs down unpaved dirt tracks. Diepsloot has become a byword for criminal gangs, vigilante mob justice and xenophobic violence.

Kganyo rises at 5.30am every day to commute to her suburban job as a domestic worker, earning 3,000 rand (£170) a month, while her husband is away for months at a time working down a mine, retracing a pattern known to generations under apartheid. "Diepsloot is getting worse," she said. "The price of paraffin is up, the price of taxis is up, the price of food is up. There are criminals here: sometimes you can't go out at 10 o'clock."

Kganyo lives in a cramped tin shack without electricity at the back of a dusty yard. She has been on the waiting list for a government house for more than 10 years. "We always voted for the ANC but we've been living in the shacks for many years. They say they're going to build a house and nothing happens. If you select a council, they work for themselves, not for us."

The ANC faces an uphill battle to win over "born frees" with no memory of the liberation struggle and no instinctive loyalty to the party. Among them is Bonginkosi Dlamini, another Diepsloot shack dweller who was robbed at gunpoint last year. "They benefit themselves instead of the country," he said. "They build big houses and drive fast cars while the rest of us suffer and don't have access to water. They should be making changes in Diepsloot but it's getting worse."

Surveys have found that the ANC's political power rests on an underclass: at least two thirds of its voters are unemployed. Now it faces a competitor for this constituency for the first time. The EFF is hoping to invoke Mandela's words from 1993: "If the ANC does to you what the apartheid government did to you, then you must do to the ANC what you did to the apartheid government." The fledgling party essentially claims that Mandela's revolution is half-finished: while political liberation was achieved 20 years ago, economic liberation remains elusive.

White-owned land is one emotive example. Soon after 1994, the ANC set a target of 25m hectares, representing 30% of agricultural land, for transfer to black people within five years, but to date only about 7% has been transferred and most is not used productively. The EFF claims that the ANC has sold its revolutionary soul to "white monopoly capital" and that serial corruption scandals, notably the spending of £13.7m on president Jacob Zuma's homestead in Nkandla, show its contempt for the poor.

Voters outside a polling station during South Africa's first post-apartheid vote, in 1994 Photograph: Peter Turnley/Corbis

For its part the EFF claims to draw its ideological DNA from Marx, Lenin and Frantz Fanon. In 2010 Malema visited Venezuela, where he met Nicolás Maduro, now the country's president, and neighbouring Zimbabwe, where he was warmly greeted by Mugabe. He said this week: "We were inspired by the system in Venezuela, where oil is nationalised and its proceeds are used to improve primary healthcare and education and issues that affect the poorest of the poor.

"We are inspired by Chávez, the ability to stand up to multinational companies that represent imperialism in those countries, and say we are taking what rightfully belongs to us and deal with the consequences. In the same way, we are inspired by Robert Mugabe. We may not agree with the violence used in the process, but taking up the land we agree with completely.

"We are inspired by President Mandela himself. The real Mandela, not the artificial one that you guys have created for yourself. The Mandela who was ready to take up arms and kill."

The EFF's manifesto includes wildly audacious promises to nationalise banks and mines, expropriate land without compensation, increase the minimum wage and double all social welfare grants. Critics say this would cost trillions of rand and bankrupt Africa's wealthiest nation. They point to Zimbabwe, where seizures of farms wrecked agriculture and triggered catastrophic hyper-inflation.

But when pressed, Malema retorted: "Don't talk like the Zimbabwean policy is the only one that has failed. Capitalism has failed under supervision of London and America. You have exploited Africa, you have created poverty in Africa, you have created a disease in Africa, you have created unemployment, homelessness. So, who are you to tell us that Zimbabwe has failed as if England or America has succeeded in creating wealth and a better life for Africans in Africa?"

The EFF's agenda sets it apart from a crowded election field in which the ANC's principal opposition, the Democratic Alliance (DA), is even more pro-market and right of centre. This was never more apparent than after the police massacre of 34 striking mineworkers in Marikana in 2012. While the DA's response was relatively muted, Malema raced to the scene and later returned to launch the EFF there, promising workers that it would empower them, not foreign-owned companies, to benefit from the mineral wealth under their feet.

Indeed, Malema articulates the failures of the past 20 years with aplomb, picking at scabs and speaking painful truths. Expelled from the ANC for ill-discipline, he is now arguably its most eloquent critic. The EFF poached ANC veteran Dali Mpofu, a high profile lawyer, and has won surprising support from middle-class voters eager to give the ANC a bloody nose, including actor Fana Mokoena, playwright Mike van Graan and gay rights activist Tsehpo Cameron Sithole-Modisane.

Author and journalist Hagen Engler wrote of the EFF: "The party expresses a profound, worldwide, popular dissatisfaction with the current economic system … The ANC will govern. But it needs to be encouraged to follow through on its pro-poor traditions. And I think my vote for the EFF will help to give it that encouragement."

But Malema is a tainted figure in many eyes. He is facing court charges of fraud, corruption and tax evasion, and has been criticised for a lavish lifestyle – wearing Louis Vuitton shoes and driving a Mercedes-Benz on the campaign trial – that is at odds with his pro-poor declarations. Critics describe him as an authoritarian populist and dangerous demagogue. One observed that he gives a good cause a bad name.

Mainstream political commentators are also sceptical about the party. Aubrey Matshiqi, a research fellow at the Helen Suzman Foundation, said: "When you are not in power, when there is no prospect that you are going to be elected, you can afford to be as leftwing as you want. If the EFF were to come to power after this election, they would be forced to move much more towards the centre themselves. In fact, from what I hear from foreign investors and transnational companies who have met them, what they are saying suggests they are already moving to be more pragmatic."

Malema, 33, will not be moving into the Union Buildings any time soon. The ANC's formidable election machine looks set to take more than 60% of the vote. But with trade union solidarity behind it crumbling, and a new labour party mooted for the next election in 2019, some analysts believe the centre of gravity is shifting left, and the governing party will either bend or break.

A boy walks past a mural painted outside a house where Nelson Mandela once lived, in Johannesburg's Alexandra township. Photograph: Reuters

The ANC insists that it has "a good story to tell" over the past 20 years. Its glossy report of the period shows the population living below $2.50 a day falling from 42.4% in 2000 to 29.2% in 2011, along with rises in life expectancy and literacy and a reduction in HIV prevalence. The government says it has built 3.7m houses in the past two decades, extended social welfare grants to 16 million people, doubled the number attending university and nurtured a new black middle class.

Yet protests over poor service delivery are at record levels. Zuma, an increasingly toxic figure who was booed at Mandela's memorial service, claimed earlier this year: "The protests are not simply the result of 'failures' of government but also of the success in delivering basic services. When 95% of households have access to water, the 5% who still need to be provided for, feel they cannot wait a moment longer. Success is also the breeding ground of rising expectations."

That is little consolation, however, to the people of Diepsloot, who feel the gap between haves and have-nots continues to widen. If the plates are shifting, this is where the earthquake will be felt.

Moeletsi Mbeki, a political economist, said: "You go to Diepsloot and the ANC is standing up there saying: your welfare has improved enormously, we built 5m houses – they don't tell you how many of them have collapsed; we've extended the telephone system – they don't tell you how many have been cut off; we have extended the electricity system and so on and so forth.

"So, that's when trouble begins. That's when class politics starts and we are seeing this in South Africa very clearly. This black and white elite now are in partnership but the old economic system remains in place. So the mass of the people who are excluded start to demand that they get the benefits."

Political commentators frequently talk of a "ticking timebomb" or "moment of reckoning" and sometimes even ponder whether South Africa could experience its own version of the Arab spring. Twenty years after Mandela pulled of his miracle of racial reconciliation, the defining conflict facing the ANC is less about race than class, according to Mbeki. "The most critical time for African liberation movements is 15 to 20 years in power. This is where the critical moment happens because of lack of change in the economic system .

"The nationalist movements come in promising all sorts of things to improve the economy, to improve the welfare of the population, to improve the education, the healthcare. However, when they get into power they start to benefit themselves from the existing neocolonial economic system, which was not designed for the majority. It was designed to benefit minorities."

He added: " We have this black elite or middle class, call it what you may, who have been absorbed into the existing elite. That's where the 15-year itch comes in because the masses start to say 'these guys have promised all these things, but these things are not coming'."