South Africa has for many years been notorious for its institutionalized inequality between racial groups and its highly skewed distribution of wealth and income. The government, which came to power after the first democratic elections in 1994, faces enormous challenges in redressing the inequalities which are the legacy of the apartheid regime and its forebears. This paper assesses the scale of the task and the way it is being tackled, and discusses constraints and prospects for success. It describes in particular the Reconstruction and Development Programme (RDP), which is the basis of economic and social policy in the 'New South Africa'. The author argues that redistribution with growth must be the objective. After years of stagnation a resurgence of economic growth is expected, but rapid population growth, the already high level of taxation and government expenditure, and the substantial fiscal deficit and debt burden inherited by the Government of National Unity restrict the room for manoeuvre. The government is committed to meeting basic needs while containing the overall level of government spending and borrowing. Restructuring public spending has therefore become the central focus of policy. Prospects for achieving economic growth with a pro-poor orientation appear to be good, but high unemployment and pronounced income inequality are likely to prove more intractable.