* Respected activist to challenge ANC
* Cites 'failure of governance' in S.Africa
* ANC still commands respect among many S.Africans (Adds quotes, details, background)
JOHANNESBURG, Feb 18 (Reuters) - Respected anti-apartheid activist Mamphela Ramphele launched a new political party on Monday to challenge the ruling African National Congress (ANC), saying Africa's biggest economy was "at risk" from self-interested and corrupt leadership.
Invoking the spirit of Nelson Mandela and the hope and optimism that prevailed at South Africa's first all-race elections in 1994, Ramphele said the dream of the "Rainbow Nation" was dying under the ANC.
"Our society's greatness is being undermined by a massive failure of governance," she said, challenging South Africans to "build our nation into the country of our dreams".
The 65-year-old medical doctor and former World Bank managing director commands respect among many of the black majority as the partner of activist Steve Biko, who died in 1977 as a result of beatings received in an apartheid prison.
She was also placed under house arrest for seven years by the apartheid government because of her political work. Even since 1994, she has seldom shied away from challenging authority and questioning the ANC's leadership.
The new movement will be called 'Agang', the Sesotho word for "Let us build".
Although political support for the ANC is weakening 19 years after the end of white-minority rule, it remains a formidable political machine and commands a nearly two-thirds majority in parliament.
A group of ANC heavyweights split off in 2008 to form the Congress of the People (COPE) but the party fared poorly in elections the following year and has since all but imploded under fighting between its leadership. (Reporting by Jon Herskovitz; Writing by Ed Cropley; Editing by David Dolan)