South Africa is expected to announce an increase in infrastructure and social spending aimed at creating jobs for its more than five million unemployed adults when the 2004 budget is tabled in parliament in Cape Town on Wednesday.

Tony Twine, an economist from Econometrix, a financial advisory company, said Monday that Finance Minister Trevor Manuel was likely to plough more money into developing infrastructure and into social projects as a way of creating jobs.

"We can expect expansionary government spending on goods that provide economic infrastructure and on social support which could find its way into creating higher levels of direct government employment," Twine said.

The latest government figures say that about 5.3 million people, or 31.2% of economically active citizens in South Africa, most of them black, do not have jobs, but trade union estimates put that figure far higher  at around 40%.

The government has tried to fight the problem by increasing capital spending on roads, hospitals and schools by 30% annually since 1999. Recently it allocated 100 billion rand (15 billion dollars, 12 billion euros) for infrastructure development over the next 10 years.

But the economy has been unable to get anywhere near the desired level of 6% growth that is needed to deal with the unemployment problem.

Last year Manuel predicted the economy would grow by 2.2% in 2003, rising to 3.3% in 2004.

The problem has been made worse by a powerful performance by South Africa's rand, which has been the world's best performing currency against the dollar in the past two years, firming by 34 percent in 2003 to its current level of around 6.60, over and above the 43% it gained in 2002.

The strong rand has eaten into exporter profits, cut growth and slashed the state treasury's tax earnings.

Manuel cut taxes by a total of 26 billion dollars in his two previous budgets, but economists say he will be unable to do the same this time round.

"Individuals and companies can expect their tax rates to stay the same,"

said a Johannesburg-based economist who did not want to be identified.

Individuals in South Africa are currently taxed between 18 percent for lowest salary earners and 40% for the highest earners.

Companies pay a 30% primary corporate tax rate, and a secondary tax of 12.5% when they distribute dividends.

"It will be hard for the minister to give any cuts this year," the economist said.

"The strong rand has effectively lost a year's worth of tax."

AFP 17 February 2004