South Africa plans to set up a state-owned pharmaceutical company, a senior official in the ruling ANC party said on Tuesday -- a move that could squeeze local players in one of the world's biggest market for anti-retroviral drugs.

South Africa has long complained it was paying too much to secure supplies for life-prolonging HIV/AIDS drugs to state-run hospitals.

The ruling African National Congress decided over the weekend it would establish the state firm, said Gwede Mantashe, the party's general secretary.

Mantashe said in a telephone interview that there was a compelling case to establish such a firm as South Africa consumes 25 percent of ARVs in the world.

Mantashe did not give details, saying the idea was in early stages.

South Africa has at least 5.7 million people infected with HIV -- one of the heaviest caseloads in the world. It also has one of largest treatment programs.

Health authorities said in December last year 10 companies that include South Africa's Aspen Pharmacare and Adcock Ingram would share in a 4.3 billion rand contract to supply ARVs.