South Africa Could Be Next Investment Magnet : Stocks: Calls for an end to boycotts open way for U.S. cash to pour into resource-rich, long-ignored area.

U.S. investors have been pouring billions of dollars into foreign stocks, hunting for the best rewards, and South Africa may become the next fertile ground for internationally inclined Americans.

The way was cleared by African National Congress leader Nelson Mandela’s call Friday for an end to economic sanctions as the country prepares for its first elections to include all races, scheduled for April.

President Clinton has also called on state and local governments to stop boycotting South Africa.

After years of economic sanctions, U.S. investors may get what they’ve been waiting for: a chance to invest in an area rich in natural resources where opportunities have been ignored since the mid-1980s.

Analysts said the removal of barriers to South African investment could not come at a better time.

U.S. investors in August were hot on the trail of foreign stocks. Buying in international equity funds was the major driving force behind a sizzling rise in U.S. sales of mutual funds.

And industry experts predict the strong sales pace will continue through the end of the year.

According to the Investment Company Institute, total sales of stock and bond funds rose in August to $45.9 billion from July’s $43.6 billion. Buying in international stock funds was the propelling force behind the surge.

“Foreign stocks are in vogue because of pessimism about the U.S. economic outlook,” said John Brimelow, director of international equities at BV Capital Markets Inc., specialists in South African shares.

Brimelow said South Africa is an emerging market “in the sense that it is new to the consciousness of people who run internationally dedicated money.”

He said the rush to buy South African shares is already under way.

“The tepid and ultraconservative investment institutions are holding back until there is absolutely no risk left in investing there, but the bolder money managers have already started to take positions in South Africa,” he said.

Jeffrey Nichols of American Precious Metals Advisors, a consulting firm in Charlotte, Vt., said Mandela’s U.N. speech was a plea for foreign investment.

“If the country is to manage a transition from white to black rule and still remain prosperous, it will need investment capital badly,” Nichols said.

He sees good long-term investment opportunities there over the next six months.

As a result of the perceived risk of investing in South Africa, Nichols said, shares of gold mining companies are undervalued in comparison to their U.S. counterparts, and that sector is attractive to U.S. investors, particularly the low-cost gold producers.

Among his favorites are Driefontein Consolidated Co., whose cost of producing gold is only $200 an ounce, compared to the current bullion price of $355 an ounce. Elandsrand Gold Mining Co. Ltd.’s costs are $218 an ounce and Randfoltein Estates’ producing expenses are $277. Vaal Reef Exploration & Mining Co.’s costs are $256 an ounce.

Brimelow said South Africa’s natural resource companies will provide a “double ride” for investors.

“Their shares are also undervalued because of the weak global economy, which has cut demand for their products. But they’ll give investors some of the best performances once the world economy recovers,” he said.

Cyclical shares are also cheap. Brimelow’s picks include the South African brewery OTC, a domestic beer maker that also deals in other consumer goods industries, and Johannesburg Consolidated Investment, active in the mining industry.