When President Thabo Mbeki came to office in June 1996, he was perceived abroad as a new-generation African leader - and the rand was worth about US16,5c.

Today, global investors are disillusioned by Mbeki's performance. A survey, published this week by consultancy BusinessMap, shows foreign direct investment fell from US4,2m in 1999 to 1,2m in 2000; the Treasury reports a sharp decline in inward portfolio investment - only R1,9bn in the first half of the year after R82,4bn in 1999; and the rand is worth only about US12,5c.

Yet, for six months after he took office, Mbeki showed every sign of fulfilling the upbeat international expectations. He set out to play a critical role in restoring political stability in Africa. And he performed so well domestically that, in November 1999, the FM assessed the ANC government's economic performance under the front page banner: "We've never had it so good".

The article pointed out government's willingness to allow an independent central bank to maintain monetary discipline and its successful fiscal initiatives, which reduced the Budget deficit to less than 3% in GDP, reduced government debt levels and restored investor confidence, allowing the rapid accumulation of the country's foreign exchange reserves.

The achievements came under Mbeki's stewardship. For most of former President Nelson Mandela's term of office, Mbeki was responsible for domestic affairs, while Mandela concentrated on winning friends abroad. It was Mbeki who introduced government's Growth Employment & Redistribution framework in 1996, and who stood by it in the face of vicious attacks from ANC alliance partners.

The FM's positive assessment was confirmed a few months later when rating agency Standard & Poor's upgraded SA's investment rating. But, by then, events had taken a new turn as the disturbing developments in Zimbabwe became more threatening. A crack opened up in the currency 12 months ago, and confidence started seeping out of the economy.

Since then, Mbeki has seriously mishandled Zimbabwe's Robert Mugabe crisis, mangled SA's anti-Aids initiative and allowed the process of awarding the third cellular licence to disintegrate into a farce, creating the impression that investors can't expect a fair deal in SA.

At the Sacob convention in Cape Town late last year, he broke his losing streak to reassure business about his commitment to property rights and the Constitution.

But now he is orchestrating a public relations disaster for SA over Judge Willem Heath's role in investigating allegations of corruption concerning government's 1999 strategic arms deal.

"Allegations of corruption, spiralling costs and fewer benefits than expected from the R43bn defence procurement deal and seeming lack of accountability further besmirches government's reputation," says BusinessMap.

Though Mbeki has repeatedly affirmed his commitment to rooting out corruption in SA society, his refusal to allow Heath to take part in the investigation, and the way in which he is engaging in the debate, are giving rise to very different perceptions.

Yes, something has gone terribly wrong over the past year. In each controversy in which he is involved, Mbeki loses sight of the real point of any issue - strong and sustainable economic growth that will make all South Africans better off.

He focuses, instead, on semantic points scoring, whether it is with Aids activists or Heath, the PAC's Patricia de Lille, the DA's Tony Leon, or "various entities" he believes are "hired to sustain this (anti-arms deal) campaign to create a negative climate about our country and government". That quote comes from the President's broadcast to the nation last week.

If there are entities sustaining the campaign, the President's best response would be to allow Heath to take part in the alleged corruption investigation.

On Sunday, Mbeki will speak at a World Economic Forum meeting in Davos, on "A plan for Africa". Perhaps he will take the opportunity to change course. But if he is to repair some of the damage he has inflicted on investor sentiment, he has a long road to go.

With acknowledgement to Financial Mail.