PRETORIA, Oct 2, 2008 (AFP) - South Africa can't find enough skilled workers to deliver local services to the public, a top official said Thursday in delivering an annual report on the government's performance.

Frank Chikane, director general in the president's office, said that eight years ago, financial contraints were the main limit to delivering government services.

'Now we are reporting a budget surplus, but lack of capacity to spend the money, especially at the local government level, is slowing service delivery,' Chikane told reporters.

'Some municipalities do not even have a single engineer. That is a huge problem,' he added.

The government has launched a joint effort with private companies to train people in skills currently in short supply.

However, the programme has not yet produced enough experienced candidates to fill the growing number of vacant jobs.

The report said the government's fixed investment grew by 14.8 percent in 2007, accounting for 20.6 percent of gross domestic product.

This is the highest investment ratio achieved since 1985 and takes South Africa closer to governments's target of investment as 25 percent of the GDP by 2014.

But the report warned the country still needs to do more to combat unemployment and crime.

Despite being Africa's largest economy, South Africa is still struggling with high levels of unemployment, officially put at 25 percent but believed by analysts to be nearer 40 percent.

'Unemployment is at the heart of poverty, and while social grants can provide relief, employment creation is necessary in breaking the circle,' said the report.

Crime also remains one of South Africa's biggest challenges ahead of the 2010 football Word Cup.

Official figures indicate that around 50 murders are committed in the country every day, making it one of the highest rates in the world.

According to the report, latest official crime statistics released three months ago showed murder figures at the lowest level since 1994/95.