THE South African economy has turned the corner after the first recession in 17 years, but it is too soon to wind down the stimulus measures designed to bolster growth, President Jacob Zuma said in his State of the Nation Address last night.

He said the rolling three-year infrastructure budget, which has been the backbone of the stimulus programme, was up from R846billion to R787billion since he delivered his last State of the Nation Address in last June.

Zuma did not refer directly to the challenge of funding Eskom's building programme, but reaffirmed plans to set up an independent agency to buy and distribute electricity.

A senior official, who briefed reporters on some details of the proposals in the speech, said the exact form of the new agency was still being finalised, but the intention would be to dodge the conflict of interest in the current system, which makes Eskom the sole buyer and seller of power.

Addressing a consistent demand of business, he said the independent agency would make it easier for the state to buy power from independent producers and to feed that into the national grid.

Zuma said the government would also set up a R1billion guarantee fund to underpin commercial bank lending to families too rich to qualify for a free RDP home, but not rich enough to qualify for a normal mortgage.

A family income of around R3500 a month is the upper threshold for free housing, but banks require a much higher family income before they will finance a home.

The official told reporters on the sidelines of the parliamentary sitting that the guarantee would be structured to prevent banks from simply dumping their bad debt onto the government.

Zuma said the government would continue to fund infrastructure development.

"Economic indicators suggest that we are now turning the corner. Economic activity is rising in South Africa and we expect growth going forward," he said.

"It is too soon, though, to be certain of the pace of recovery. Government will therefore not withdraw its support measures," he said.

The official said the government would continue to reduce the budget deficit from an expected peak of close to 8percent this year, but would not try to do it too fast.

Zuma referred only briefly to the Industrial Policy Action Plan approved by the cabinet this week, but the official said Trade and Industry Minister Rob Davies would present the plan to Parliament within a few weeks.

Zuma said, however, that the plan would focus on "green jobs" and would promote labour absorbing industries.