* Zuma sworn in as South African president
* Mandela attends ceremony in major political coup for Zuma
* Zuma says South Africa in tough economic situation
* Fate of Finance Minister Trevor Manuel closely watched
(Adds quotes from Zuma)
By Agnieszka Flak and Serena Chaudhry
PRETORIA, May 9 (Reuters) - Jacob Zuma was sworn in as South African president on Saturday after a remarkable political comeback and quickly highlighted the challenges faced by the continent’s largest economy.
The prospect of the former guerrilla becoming the nation’s fourth head of state since the end of apartheid was unthinkable when he was nearly ruined by graft and rape charges, crises that might have buried many politicians.
Promising to help South Africans realise their dreams, Zuma, 67, took a sober view of the country’s economy which may already be in its first recession in 17 years.
“We must acknowledge that we find ourselves in difficult economic times. Jobs are being lost in every economy across the world,” the ANC leader said in his inauguration speech.
“We will not be spared the negative impact and are beginning to feel the pinch.”
Former president Nelson Mandela, like Zuma imprisoned on Robben Island under white rule, gave his seal of approval to the country’s new leader by attending the ceremony.
Air force jets flew over the presidential offices where Zuma will have to make tough decisions after winning a strong mandate thanks to the ruling ANC’s landslide poll victory on April 22.
ANC supporters in Zuma T-shirts, dresses and hats, danced in circles and shouted hymns. Some held up copies of newspaper headlines on placards which read “Zoom. Zoom. Zuma.”
While South Africans respect the ANC for fighting white minority rule, which ended in 1994, they are growing impatient with rampant poverty, crime and an AIDS epidemic Zuma has promised to tackle.
“The needs of this country stare in your face, there is no way he could ignore what needs to be done,” said municipal government official Able Moshuhla.
One of Zuma’s toughest tasks may be juggling the interests of the unions and communists who helped him rise to the top, with those of investors who fear he will steer the economy to the left.
Investors are especially interested in the fate of respected Finance Minister Trevor Manuel, praised for his fiscal management. Speaking to reporters before the swearing-in ceremony, Manuel expressed confidence in Zuma’s abilities.
“Frequently people look for experience. But what matters is attitude and aptitude,” he said. “The mood is very buoyed. Feeling very strong. There’s a big wave to ride.”
Stacking the cabinet, to be named on Sunday, with loyalists could hurt the credibility of Zuma who has said ANC officials should not expect positions just because of their loyalty.
He will be under pressure to make a clean break with what critics regard as the autocratic leadership of his rival Thabo Mbeki, who was ousted from the presidency by the ANC.
In a reminder of their fierce power struggle, Mbeki was booed at the inauguration ceremony.
“We must safeguard the independence and integrity of those (state) institutions tasked with the defence of democracy, and that must act as a check on the abuse of power,” said Zuma.
Thousands cheered Mandela, 90 and looking frail, as he was transported on a golf cart before being helped to the podium.
Zimbabwean President Robert Mugabe also attended the ceremony. One of Zuma’s major foreign policy challenges will be trying to help strengthen Zimbabwe’s new unity government which has been tasked with rebuilding the ruined country.
Zuma may have to accommodate allies like firebrand ANC Youth League leader Julius Malema, who said at the inauguration the ANC was indebted to the working class.
Zuma’s political career has been fraught with trouble. Corruption charges were dropped just before the election after an eight-year legal battle. He was acquitted of rape charges in 2006, but his image has not recovered.
He has three wives and 19 children. A local radio station said he appeared at the inauguration with his “senior” wife.
The former head of ANC intelligence is known for his mediation skills which could help him prevent ANC power struggles which led dissidents to form a breakaway party.
“We have to give Zuma a chance. He must prove that he knows where he’s coming from, he must remember the days when he joined the ANC as a young man,” said Jabulile Hadebe, a mother of four, wearing earrings covered with images of Zuma.
“He knows what he wants and he’s not afraid of fire.” (Writing by Michael Georgy; Editing by Robert Woodward)