(Writes through)
By Nicholas Kotch
PRETORIA, July 29 (Reuters) - South Africa's President Thabo Mbeki placed improving the lives of the rural poor at the top of his pre-election agenda on Tuesday and backed the case for lower interest rates to spur economic growth.
In a wide-ranging news conference, Mbeki hailed "massive progress" across many fronts since the end of the apartheid era of racial discrimination in 1994.
He signalled a head-on government offensive to tackle deeply entrenched poverty, particularly in rural areas, which is blighting the lives of uneducated and unskilled South Africans.
"You may get high growth rates but make no impact on that section of the population," Mbeki said, presenting the results of a three-day cabinet meeting held last week.
Sharp falls in consumer inflation during June, coupled with a slowdown in economic activity in the first quarter of 2003, have prompted calls for the central bank to cut rates -- commercial lending rates stand at 15.50 percent.
Mbeki left no doubts about his preference.
"We have no influence on that matter but clearly cheaper money would be good for the economy," he said, adding there were signs that the economic slowdown was starting to reverse.
The "modern" side of South Africa's economy -- ranging from financial services to auto manufacturing -- is in good health. But the country of 44 million people has an estimated unemployment rate of 30 percent and the government blames poverty for high crime rates.
RULING PARTY LOOKING FOR BIG WIN
The ruling African National Congress (ANC) is a shoe-in to win elections next year with Mbeki securing his second, and constitutionally final, five-year term.
But the leftist ANC is worried about the size of its victory amid spreading voter apathy and grumbles from the grass-roots about slow delivery of jobs and other post-apartheid benefits.
Opposition parties, struggling to be relevant in a democracy dominated by the ANC, are certain to portray some of the anti-poverty measures as fishing for votes.
Mbeki, 61, said the private sector would not accept the unprofitable task of investing in areas with poor infrastructure and an unskilled workforce -- government had to lead the way.
"So we need significant capital transfers in order to change the lives of the people," he said, putting flesh on a previously announced Extended Public Works Programme.
It will cover roads, housing and other building projects as well as boosting adult literacy and training centres. No price tag was put on the programme.
Mbeki repeated pledges for an expanded social security net, from child benefits to food parcels for the poorest households.
He pledged major investment in South Africa's ports, air freight capacity and railway rolling stock to shift goods faster in, out and around the country.
Finance Minister Trevor Manuel issued a similar message to business leaders on Monday, urging them to help the country boost its average annual growth rate of 2.8 percent because it was insufficient to reduce poverty.
In his upbeat review of what he called "The First Decade of Freedom", Mbeki said South Africa was making great strides to be a non-sexist, non-racist society.
Police crime statistics next month were likely to confirm "the trend of reduction and stabilisation in priority crimes", he said.
South Africa has some of the highest murder and rape rates in the world. Government assertions that things are improving are hard to verify because of the way statistics are presented.
An official statement on the cabinet meeting made almost no mention of AIDS. South Africa has the highest number of people living with HIV/AIDS in the world.
Mbeki said he was "concerned" about the long-running police investigation into Deputy President Jacob Zuma over graft allegations linked to a multi-billion dollar arms deal.
"I've said to the minister of justice surely the sooner this matter is resolved the better. We can't have it dragging on forever," he said in reply to questions on the case.