The first deputy managing director of the International Monetary Fund has told South African policy-makers they must act to address the one-third of the working population that is "effectively excluded" from the economy.

Speaking in Johannesburg, David Lipton emphasised that "the cost of insufficient action has reached a critical point" in South Africa and that it is now time for a "new approach".

"It is just not a matter of tax cuts or spending increases. Rather, it is a question of fundamental