South Africa intends to create a 10 billion rand fund to tackle massive unemployment in Africa's biggest economy, the ANC's Secretary General Gwede Mantashe told Reuters on Tuesday.

The 10 billion rand job fund will to be a partnership between government and the private sector, he said in an interview at the ruling party's offices.

Initially the government will lay out the capital and businesses who participate, by hiring new workers or by providing training schemes, were likely to benefit from incentives such as tax breaks.

Job creation was expected to be the major theme of President Jacob Zuma's state of the nation address on Thursday, when he outlines his government's priorities.

We must not only do something when the anger and humiliation of those unemployed turn into uprisings when they begin to revolt, Mantashe said.

The fund will be used to help Zuma's already announced plan to create 5 million jobs in 10 sectors, although some analysts say the focus on government-directed employment growth should be shifted to the private sector, with laws that make it easier and less costly for firms to hire workers.

Unemployment in the continent's economic powerhouse fell to 24 percent in the fourth quarter of 2010 from 25.3 percent in the third quarter, but more than half of employable youth under 24-years-old were without work.

High unemployment levels are partially attributed to tough labour laws which make it relatively expensive and unattractive for company's to hire new workers. However, calls to amend the labour laws have traditionally raised tensions between Zuma's ANC and the labour federation COSATU that supported his rise to power.

He (Zuma) needs to make it easier and cheaper to do business and loosen labour market tension if there are going to be any strides towards growing employment, independent political analyst Nic Borain said.

Mantashe said the fund was intended to address a skills shortages and to provide real benefits for the unemployed and to lessen the impact of the poverty many of them endure.

The government has proposed sweeping changes to labour laws intended to appease COSATU by increasing job security for temporary workers but economists expect the shake-up will make unemployment worse and ramp up costs for employers.

The ANC and COSATU are at odds over the ruling party dropping the adjective decent to describe the types of jobs it plans to create. Mantashe said there was nothing as indecent as being unemployed.

Apart from the job fund, Zuma's government was also contemplating a youth wage subsidy for entry level workers which is likely to appease business who were unhappy with paying high start up wages without knowing an employee's level of skill.