The negotiations between the ruling ZANU-PF and opposition Movement for Democratic Change (MDC), are seen as Zimbabwe’s best chance to end a post-election crisis and raise hopes of recovery from an economic catastrophe.
Tsvangirai left the hotel where the talks with Mugabe and MDC breakaway faction leader Arthur Mutambara were taking place after four hours on Tuesday but it was unclear if the talks had broken down.
Asked if the talks had ended, he replied that South African President Thabo Mbeki, who was mediating, would issue a statement.
Mugabe said on Monday there was progress, although a ZANU-PF official said the talks were in danger of failure.
"Tsvangirai is moving goal posts, forcing us to negotiate issues which we had already agreed upon," the official told Reuters, referring to whether Mugabe would head a new unity government. An MDC source said Mugabe refused to give up executive powers.
Talks began in July after Mugabe’s unopposed re-election in a June poll condemned throughout the world as unfair and boycotted by Tsvangirai because of attacks on his supporters.
There is a host of formidable issues.
First and foremost is whether Mugabe will be ready to give up powers that helped him keep a tight grip on Zimbabwe for more than 20 years. Who will control security forces is another critical question.
Mugabe, who has increasingly relied on the army for support, conferred medals on 16 generals, three of them posthumously, at a ceremony on Tuesday honouring Zimbabwe’s military.
The recognition comes as Mugabe tries to keep powerful figures on his side during the crucial talks. The head of the Central Intelligence Organisation was also honoured.
Mbeki could score a political coup if a deal is reached before a weekend regional summit of the Southern African Development Community (SADC) group of countries.
The South African leader has been under fire for not being tough with Mugabe, a policy he says would aggravate tension.
"I suspect that long before we get to the summit there will be some decision coming out of Zimbabwe," Aziz Pahad, South Africa’s deputy foreign minister, told reporters in Pretoria.
He said there was no set deadline for a deal.
"If there is still more time needed for more consultations that shouldn’t lead us to despair. It just means that they are still talking. The fact that the parties are continuing to talk is a positive aspect."
Investors are likely to remain cautious even if there is a breakthrough, seeking reassurances that a new government can rescue what was once one of Africa’s most promising economies and safeguard their money, financial analysts say.
Nic Borain, a political consultant at HSBC, said ZANU-PF and the opposition have few options.
"I don’t foresee a total breakdown where there would essentially be war on the streets or at least very high levels of repression and exclusion," he told Reuters.
"I don’t think they (the talks) will remain on the rocks, because I think all the parties eventually have no way out of it other than talking to each other."
All eyes may soon be on Mutambara.
The former robotics professor is emerging as a key player, political analysts say. His faction’s members in parliament can support either Mugabe’s ZANU-PF or Tsvangirai’s main MDC party, which have almost equal numbers of seats in the lower house.