There is still a marked contrast between the country's rich and poor

He was responding to official figures showing that gross domestic product (GDP) grew by just 1.1% in the third quarter, well below the expected 1.8%.

Mr Manuel said: "We have lots of people but we don't have sufficient skills."

Analysts have warned that South Africa's annual growth target could fall below the government target of 2.2% during 2003.

Legacy

Mr Manuel also blamed the low saving rate for hampering investment. He said both factors remained from the apartheid years.

It's a legacy... it will act as a break to growth for a long time yet Trevor Manuel

"We have to be realistic, it's a legacy... it will act as a brake to growth for a long time yet," he said.

"These two factors will continue to constrain growth in the country."

With a general election next year, the ANC government could do with some good economic news.

Its recent budget is certainly aimed at fuelling the growth of the economy, but critics have said it smacks of an over generous pre-election giveaway.

Over-valued currency

The latest fall in South African GDP was led by a sharp 21.8% fall in the agricultural sector.

South Africa is also struggling with falling prices, and an over-valued currency.

Analysts believe there will be interest rates cuts in both December and February.