S.Africa must end economic inequalities - Zuma

By Agnieszka Flak

JOHANNESBURG (Reuters) - South Africa must ease economic inequalities or face serious consequences, President Jacob Zuma said, a policy that could unnerve foreign investors worried he may steer the economy to the left.

Zuma, inaugurated last month, may be headed for a confrontation with union allies, who have threatened to stage mass strikes for deeper interest rate cuts and called for Reserve Bank Governor Tito Mboweni to go.

In comments broadcast on Sunday, Zuma said ignoring poverty in Africa's biggest economy would be risky.

"If that happens you are certainly sitting on a situation that will explode one day," he said in an interview with local SABC television.

One of Zuma's most difficult tasks will be balancing the interests of unions that helped his rise and those of foreign investors who fear labour allies will force him to change economic policy.

"If the economy is growing, it (has) got to benefit the people of the country ... we need to do something to address that problem. We cannot allow the gap to widen all the time," said Zuma.

Analysts doubt unions will emerge victorious in any showdown but markets are watching political tensions as Zuma tries to navigate the country through its first recession in 17 years.