Finance Minister Pravin Gordhan on Thursday estimated that the economy would create 780 000 new jobs over the next three years.

The modest forecast, in his Medium-Term Budget Policy Statement, came with a warning that slower growth and rising wage demands were likely to hamper new hiring.

"Rising wage demands across the economy could put pressure on new hiring. The economy is projected to create 780 000 jobs over the next three years."

Gordhan said employment gains had declined in line with growth over the past year, and high levels of structural unemployment was making labour market entry more difficult for young and unskilled job-seekers.

In the past 12 months, 125 000 jobs were created, of which 38 000 were in the public sector.

Gordhan pointed out that the private sector accounted for more than 75% of jobs in South Africa.

"Creating a buoyant private sector that works in partnership with an effective government will help South Africa to achieve faster growth and sustainable job creation," he said.

The minister said nominal wage settlements in the first nine months of 2012 were down to 7.4%, from 7.7% in 2011.

Real wage growth has however slowed to 1.8% in the first half of the year, compared to 2.7% last year.

In 2010, government set the target of creating five-million jobs by 2020, but so far employment gains have lagged far behind the rate of half a million new jobs a year needed to achieve it.