(MONEY Magazine) – On may 10, Nelson Mandela marks his first year as president of South Africa -- and patron saint of MONEY's New South Africa portfolio of 12 stocks (see left). As I reported in our July 1994 issue, this bountiful, postapartheid nation has enormous potential for economic growth on a continent starved for progress. Our experts on the Johannesburg Stock Exchange (JSE), the world's 10th richest in total value, named a dozen stocks, eight of which trade in the U.S. as ADRs (American Depositary Receipts). At last count, our portfolio had shot up 56% in dollar terms, vs. 9% for the Dow and 1% for the JSE industrial index of 80 companies.

Fascinated, I flew to Cape Town to determine whether South Africa is still a buy. You bet, says Gerrit Smit, 43, chief investment strategist at Sanlam, the nation's No. 2 insurer with $28 billion in assets. Among our 12 stocks, his three picks soared 76% as a group, led by a 166% gain on City Lodge, a chain of 13 budget hotels. A lucky call? Hardly. In 1992, Smit's group was entrusted with the pension fund of Mandela's party, the African National Congress. We estimate this fund of mostly local growth stocks has more than doubled over the two years to 1995. Deadpans Smit: "I can only confirm that we handily exceeded our goal of beating the JSE overall in '93 [up 50%] and '94 [up 20%]."

The impetus, explains Smit, is mounting confidence at home and abroad that South Africa will be ever more peaceful and prosperous under majority rule. He predicts that real economic growth this year will hit 3%, vs. 2.3% in '94, because of resurgent consumer spending and capital investment. Industrial earnings could surge 28%, nearly double last year's 15%, propelling the JSE another 18% in '95. And tourism at the beach resorts and wildlife reserves of this often stunning landscape (like California's but three times larger) is growing an incredible 20% monthly, tapping a wellspring of crucial entry-level jobs.

At MONEY's request, Smit recommended five new stocks with the potential to earn 50% as a group by the end of next year. Three are ADRs traded over the counter in the U.S. The other two can be bought on the JSE via major American brokers (commissions mirror those on U.S. stocks). Prefer a fund? Smit is an adviser to the $110 million Southern Africa Fund, which owns three of his current picks, De Beers, Malbak and Naspers. The closed-end fund recently traded on the New York Stock Exchange at $14.50 (ticker symbol: soa). Southern Africa Fund sells at a 19% discount to its $17.87 net assets per share and returned a fat 42% on NAV over the past 12 months. His five favorites:

De Beers (DBRSY; $24.50 per ADR). This $11 billion (in assets) mining house is often the only South African company that Americans can name-thanks to the $180 million spent annually on its "Diamonds Are Forever" marketing campaign. So why has the De Beers' cartel, which controls 80% of the $5 billion world market for uncut diamonds, seen its stock slide 27% from a $33.50 high on the JSE in August? Says Smit: "Many investors mistakenly fear the cartel will be broken by the economic collapse of Russia," the world's top diamond producer. Since 1990, Russian miners have contracted to sell most of their annual output (lately around $1 billion) through De Beers. As the country's wheezing economy worsened over the past two years, however, diamond stockpiles worth an estimated $800 million in '94 were sold clandestinely, undermining De Beers' efforts to balance market supply and demand. Still, Smit figures the stock is a steal at $24.50, which is just a shade above the current $23 value per share of De Beers' nondiamond businesses. Foremost among them is the firm's 39% stake in $17 billion (in assets) Anglo American, South Africa's No. 1 conglomerate. "So buyers of De Beers amazingly pay almost nothing for its huge diamond assets," he exclaims. Not for long, however. He's betting that the company can reassert control of the diamond market this year by making the Russians part owners of the cartel, entitling them to a cut of profits. And the ADR? Smit sees it above $37 next year, a possible 51% gain.

Servgro (SVGRY; $6.50). Selling around 20 times '94 earnings, says Smit, $268 million Servgro represents a rare bargain in South Africa's red-hot $2 billion tourism industry. (His sizzling '94 pick, budget inn City Lodge, is now 50% pricier at 30 times profits.) Why? He believes the allure of Servgro's thriving Avis franchise, Protea chain of 76 upscale hotels and Fedics airline catering has been temporarily sullied by an unexpected earnings stumble at Teljoy, a supplier of cellular phones and video rentals that generates 16% of group profits. "Teljoy couldn't keep up with booming orders for cell phones last year," explains Smit. "Now it's added capacity to meet demand." He thinks Servgro's earnings can spurt 26% this year and next, lifting the ADR 54% to $10 in '96.

Naspers (16 rands/$4.50). Listed on the JSE in September and 20% owned by Servgro, this $333 million publisher of regional newspapers and women's magazines is Smit's pet bet on rising disposable income, particularly among nonwhites (about 86% of the nation's 40 million population). A prime example is City Press, a Sunday paper targeted at blacks in metro Johannesburg. Circulation has nearly tripled to 260,000 in four years. Naspers also owns a 28% stake in M-Net, South Africa's popular pay-TV service, which will soon double its channels to four. Smit figures earnings can jump 17% this year and 39% in '96, elevating the stock 56% to $7 next year.

Rand Merchant Bank (33 rands/$9). Smit says this mid-size investment bank, with assets of $6 billion, invariably has the inside track on the country's emergent merger-and-acquisition activity, bankrolled increasingly by global suitors. "The deal flow is bound to accelerate rapidly as more and more foreign companies decide they really can't afford to be on the sidelines anymore," pre-dicts Smit. In response, he sees Rand's earnings compounding 30% annually through '97 and the stock rising 56% to $14 next year.

Malbak (MLBAY; $6.25). This $3.5 billion conglomerate is fast emerging from a painful four-year restructuring that, Smit argues, will now allow it to capitalize on the nation's new urge to splurge. Malbak's star lineup of leading consumer businesses includes brand-name foods (like Green Giant frozen vegetables), prescription and generic drugs, furniture and appliances, and dealership franchises for Honda, Nissan, Toyota, Volkswagen and even Mercedes-Benz. Smit is banking on earnings rising 24% this year and 21% next. And his '96 target for the ADR is $8.50, a 36% profit.