South Africa will create a US-style development aid agency and foreign policy institute before the end of the financial year, International Relations and Cooperation Minister Maite Nkoana-Mashabane said.

She made the announcement at a regional heads of mission conference in Nairobi, Kenya, during a three-day foreign policy session, the Business Day reported o Wednesday.

The South African Development Partnership Agency, which has already been approved by the Cabinet, will operate along the same lines as USAid, an initiative that provides developing countries with funding for economic and humanitarian projects , as part of the US's foreign policy objectives.

"This agency will not only enhance our contribution in institutional and capacity building on the continent, but also ensure that our post-conflict reconstruction and development efforts are centrally co-ordinated," Nkoana-Mashabane said.

Ministerial spokesman Saul Molobi said on Tuesday that the department was still drawing up a budget and could not immediately say how much the projects would cost.

The proposed development aid agency also forms part of the country's plan to play a more prominent role on the continent as a major donor country. Through the multimillion-rand African Renaissance Fund, managed by the Department of International Relations and Co-operation, South Africa is one of the largest development aid providers in Africa.

The African Renaissance Fund and all its activities will eventually be absorbed by the new aid agency, which will reduce the bureaucracy and duplication.