JOHANNESBURG, Dec. 21 (Xinhuanet) -- Tainted by the much publicized corruption and rape cases against sacked deputy president Jacob Zuma, 2005 may have been a hard year for South Africa's ruling ANC party, but as the year comes to a close and the country's economy grows by a projected 4.5 percent, President Thabo Mbeki may have something brighter to look at after all.

    In his last ANC Today online letter for the year, Mbeki was upbeat about the state of the South African economy, powerhouse of the impoverished continent, saying it had achieved the highest growth rate since 1984.

    However, he did not shy away from ill-discipline and corruption in the ruling party and its allies, and also had harsh words for those violently protesting against the recent controversial changes to provincial boundaries.

    On South Africa's economic growth, he said: "The economy has grown during every quarter since 1998, representing an unprecedented upswing in our recorded economic history."

    South African economic growth rate has been a hot topic since Mbeki announced on July 24 that the government was aiming for sustainable annual growth of 6 percent and appointed a task team headed by Deputy President Phumzile Mlambo-Ngcuka to find ways to achieve this.

    With its aim to create jobs and boost investment, South Africa launched the team consisting of senior economic ministers, including Finance Minister Trevor Manuel, Trade and Industry Minister Mandisi Mpahlwa, and the premiers of Eastern Cape and Gauteng.

    Mbeki said a vital ingredient needed to achieve higher growth was increased levels of investment. He referred to the target set by the Growth and Development Summit two years ago for 5 percent of "investable funds" in the private sector to be ploughed back into the economy.

    He promised greater investment by state-owned corporations. As much as 180 billion rand (about 27.27 billion US dollars) has been committed over five years by South Africa's big public utilities, including Transmit and Eskom, to be spent mainly on infrastructure projects in the national logistics system, energy and water.

    This would in time spur further private investment, he said, "we need a supply side-led process of growth. government has to invest more in the economy."

    If South Africa could achieve growth of between 5 percent and 7percent annually, the economy would double in size in a decade, unemployment could be halved, adding muscle to government's efforts to resolve many issues of social transformation.

    The new thrust for growth is further evidence of government's concern about the long-term sustainability of South Africa's growth path, driven by consumer-driven growth, prompting concern over rising household debt levels.

    Analysts here said Mlambo-Ngcuka's task team is the latest in aseries of interventions aimed at speeding up growth and job creation. These include the microeconomic reform strategy, decisions of the Growth and Development Summit, the Expanded Public Works Program, and attempts to rethink the labor market.

    But Mbeki said there would be no major departure from government's macroeconomic path. Fiscal and monetary authorities would continue working together to pursue a "stable and competitive exchange rate."

    Mbeki quoted with approval the view of London-based Neil Gregson of Credit Suisse Asset Management that "there is no doubt that South Africa is firing on all cylinders."

    Economists here said that South Africa could achieve its target of 6 percent growth if it addressed the skill shortage, upgraded infrastructure, and boosted investment and exports.

    Through its accelerated and shared growth initiative, the government aims to raise growth to a sustainable 6 percent by 2010in order to reduce unemployment and halve poverty by 2014.

    Lesetja Kganyago, director-general of the National Treasury, noted that the government had identified obstacles to achieving its target. They include currency volatility, red tape, the skills shortages, infrastructure-related bottlenecks and a lack of competition in some industries.

    Economists said that if these constraints were removed, and if sufficient domestic and foreign investment were attracted and exports boosted, 6 percent growth could be achieved comfortably.

    But George Glynos, a market analyst at Econometrix Treasury Management, said: "Honestly, it is going to be difficult to achieve a 6 percent sustainable growth level because we still haveto address issues of skills shortage, HIV/AIDS, and labor market rigidities."

    The Economic Freedom of the World: 2005 Annual Report identifies a slightly different set of problems. The most prominent are excessive government consumption expenditure; government enterprises playing too large a role in the economy; top marginal tax rates that are too high and concerns over the integrity of the legal system.

    The economy grew 4.5 percent last year, a level the government wants to maintain over the next five years. Much of that growth was driven by robust domestic demand.

    Analysts argue that fixed investment would have to take over as the primary driver in order to shift to a higher growth path.

    Like the East Asian Tigers, South Africa needs to attract large amounts of investment and embark on an export-led growth strategy. With this in mind, the country is positioning itself as an industrial exporter through its industrial development zones at Coega, East London, Richards Bay and Johannesburg International Airport.

    The industrial development zones are also being used to lure large-scale industrial foreign investors, although the lack of tax incentives has hindered this objective.

    "Exports are a profound lever to give strength to an economy's internal growth dynamics," said Standard Bank's group economist Goolam Ballim.

    The country is nevertheless netting foreign investors. This year Barclays bought a 31 billion rand (about 4.8 billion US dollars) controlling stake in ABSA and British telecoms firm Vodafone is trying to raise its stake in Vodacom. Enditem