* ANC wins by smaller margin than in 2006 race
* Main opposition's support jumps
JOHANNESBURG, May 21 (Reuters) - South Africa's ANC was declared winner in municipal elections on Saturday but gains by the main opposition show growing frustration with the party which has been in power since apartheid ended 17 years ago.
The African National Congress secured 62 percent of the vote, less than the 67 percent it gained in the 2006 elections.
The Democratic Alliance, once associated with white privilege and now trying to recreate itself as the party of good governance for all, saw its support jump to 23.9 percent from 14 percent in 2006.
The election for 278 municipalities was held on Wednesday.
The biggest issues in the race were the slow pace of delivery of water, electricity and basic education for the poor and the anger of taxpayers who felt too much money was being lost to government corruption.
"(The election) came down to bread and butter issues as any municipal election should," President Jacob Zuma said during the announcement of the results by the country's electoral body.
A drop in support for the ANC is unlikely to bring major policy changes but it could jeopardise Zuma's chances of re-election when his party chooses a leader next year. The ANC may also seek to win back disenchanted voters by increasing spending.
The DA cut into ANC margins in major cities already controlled by the ruling party and received a growing show of support in Cape Town, the only major DA-controlled city.
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For graphic on poverty, click http://r.reuters.com/gyx49r
For table on the results [ID:nLDE74I0D8]
Q+A on election [ID:nLDE73R1DJ]
For post-election scenarios [ID:nLDE74C1J8]
For Factbox on S.Africa since apartheid [ID:nLDE7331TG]
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The immediate impact from the election will be inside the ANC as factions jostle for power ahead of internal elections for party leaders next year.
The easiest way for the government to bolster support would be to spend more on projects for poor blacks, the ANC's power base, a move which would put pressure on next year's budget.
Despite investing billions of dollars in infrastructure, the ANC-led government has struggled to address apartheid-era problems, with nearly half the population living in poverty. (Reporting by Olivia Kumwenda; Editing by Jon Hemming)
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