SA shrugs off challenges

"The economy is performing well, but we still have millions living in poverty and many more unable to get jobs," Manuel said.

"We cannot be satisfied with our performance until we have made a bigger dent in unemployment and poverty.

"We are not yet there, but we still have much to be proud of what we have achieved in such a short space of time."

He told the IMC the country's economy grew 5% last year - the highest growth in 25 years - and the third year of sustained economic growth.

The unemployment rate had also declined for three years in a row, with over a million jobs created.

"All the major indicators of economic growth are showing that the present economic boom represents one of the longest sustained increases in income in about 40 years," Manuel said.

"What started off as a consumption boom has quickly translated into an investment boom, with private sector gross fixed capital formation now standing at its highest level since our records began..."

Public spending risen

"This growth has been relatively broad-based with the share of income going to Africans rising to above 50% in 2005, from about 40% in 1996.

"The number of black people entering what is called 'the middle class' increased by 30% in a single year to 2.6 million last year.

"This represents a substantial shift in the purchasing power in South Africa towards the historically disadvantaged."

Manuel told the IMC the country's economy was "literally on its knees" when the first democratically elected government took power in 1994.

However, the government had quickly stabilised public finances and introduced inflation targeting.

Manuel attributed the present economic boom to government policies and a favourable international economic environment.

Public spending had risen by more than 70% in real terms since 2000, he said.

"In a short space of time, we have increased the number of social grant beneficiaries from about three million to almost 11 million."

'Targets surpassed'

"We are now able to spend billions more on infrastructure, and have in many cases surpassed the targets we set for ourselves in 1994."

Manuel told delegates government would spend R415bn on infrastructure in the next three years.

"Increased confidence in our economy means that we do not face a binding constraint on the balance of payments.

"We are now comfortably able to finance a much higher level of investment, providing the space for future growth."

He said South Africa received R144bn in capital inflows last year.

The government was now focusing on skills development and investments in the built environment, including housing, public transport and water.

"For South Africa to sustainably grow faster, we must improve our export performance, especially in non-commodity sectors," he said.