The U.S. Secretary of State arrived in the Cape Flats area on a tour bus, seated next to the head of the Victoria Mxenge Housing project who spelled out to Clinton the progress made since she first showed an interest in 1997 and then visited a year later with her husband, ex-President Bill Clinton.

Clinton toured two sites in the Cape Flats where hundreds of homes had been built on land where corrugated iron shacks once stood. However, the landscape is still filled with shacks.

Later, in an area called Site C in Khayelitsha township, Clinton told her staff to roll up their sleeves and join teams of women who were either planting flowers or clearing rubble for a new house being built.

Clinton's spokesman P.J. Crowley and the new U.S. ambassador Donald Gips built up a sweat loading wheelbarrows while Clinton and New York lawmaker Nita Lowey, who accompanied Clinton on her trip to Africa, planted marigolds.

Millions of poor blacks are living in townships or squatter camps 15 years after the end of apartheid.

Violent protests against the government over the past month have increased pressure on President Jacob Zuma to live up to his election promises to help the poor.

Clinton said the project, constructed largely by women from the community and financed through micro-credit loans, was an excellent model to help solve South Africa's housing problem.

50,000 HOUSES BUILT

"I am very proud to see the progress you have made and to know that because of your efforts, there are 50,000 houses built like this across South Africa," Clinton told a group of women and children who had gathered to see the celebrity diplomat.

She posed for cameras and danced with members of a township choir who shouted "Viva Hillary, Viva."

Patricia Matolengwe, who heads the project named after slain anti-apartheid activist Victoria Mxenge, and her staff asked Clinton whether she would like to invest in the project.

Not having any cash on her, Clinton turned to her top diplomat for Africa, Johnnie Carson, who pulled a $50 bill from his pocket and handed it over on behalf of his boss.

"These are good businesswomen," quipped Clinton, after which she shook a few hands and left in her official vehicle for a private meeting in Cape Town with former U.S. President F.W. de Klerk.

Clinton heads to Angola on Sunday, the third country in a seven-nation trip to Africa that ends on August 14.

(Editing by Robert Woodward)