GARY Sharma manufactures and sells watches. His factories on the mainland produce about 250,000 a month destined mainly for export. Like any businessman, he looks constantly for new markets, and at the moment his eyes are firmly fixed on South Africa. ''Six months ago I was scared about the political situation but now I'm seriously thinking about setting up a factory there,'' he said at his Hong Kong base last week. ''I had six buyers here this week and they're all talking about the market opening up.'' But setting up a manufacturing base in South Africa is only half the equation: Mr Sharma still expects his earnings to grow substantially from soaring exports to the region. ''After the elections, business is going to boom. When everything has settled down I am looking at exporting a very big quantity to South Africa,'' he said. Although his PRG Watch company is a small operation in Hong Kong, Mr Sharma's sentiment is echoed evenly throughout the territory's investment community. Banks, investment houses, traders and manufacturers are all casting their eyes West, where a trickle of investment into South Africa is poised to turn into a flood. According to reports, about US$17.5 billion (HK$135.28 billion) is waiting to descend on South Africa from the United States alone, with investors looking at everything from financial markets, to manufacturing plants to property. The country that was once an international pariah is set to become the darling of the investment community. ''There is a huge appetite for South Africa on the investment side,'' said Nick Burton, managing director of Nedfinance (Asia), the local arm of South African-based Nedcor banking group, one of the four biggest finance houses in the country. Mr Burton estimated that since the securities arm of the bank set up operations in Hong Kong last December, it had taken about 450 million rand (about HK$855 million) worth of investments, split evenly between bonds and equities. That does not take into account substantial deposits in financial rands, the South African currency traded internationally for non-residents. According to one senior investment banker in Hong Kong, local investors have bought about US$500 million worth of the ESCOM bonds, issued by the giant South African electricity group, in the last two years alone. But ''hard investments'' such as building or buying new manufacturing plants are still to materialise. According to Mr Burton, potential investors are sitting on the fence until a more settled political scene emerges. ''It's quite clear that some people have been holding off. It's very much a wait-and-see situation,'' he said. The attractions for Hong Kong entrepreneurs are clear: low labour costs, many first-rate infrastructure facilities, investment incentives, cheap land and, perhaps most important, the opportunity of selling into a larger African consumer market. ''It's a bit like Hong Kong and China. South Africa has many First World attributes and is on the doorstep of a potentially huge consumer market,'' said one banker. At present, only a handful of local companies have operations in South Africa but interest is growing, according to Kenneth Hughes, managing director of ABSA Finance (Asia), the Asian operation of South Africa's biggest banking group. ''A lot of people still don't know about the place but the picture is changing. We are starting to see growth in investment, especially from China,'' said Mr Hughes. If the locally-based companies are adopting a more circumspect approach, the story is markedly different across the border. Mainland companies including Great Wall, China Resources, and representatives from the Chinese chambers of commerce have made a strong push into the country. Analysts believe the future looks bright for South Africa if the new government can successfully unite the country. Apart from its attractions to international investors, the economy is expected to grow strongly over the next two or three years following its emergence from a four-year recession in 1993. The election has cleared the way for South Africa to resume its membership of the International Monetary Fund (IMF), which in turn makes it eligible for loans from the World Bank. Under the General Agreement on Tariffs and Trade it will roll back its restrictive tariffs over the next six years. The reduction in tariffs is also likely to produce an import boom, with countries producing textiles, garments, footwear and cheaper consumer durables in line for an export boom. According to the Hong Kong Trade Development Council, South Africa was Hong Kong's 24th biggest export market last year, showing a year-on-year increase of 10 per cent on the value of goods exported to US$608 million. Textiles, garments, watches, clocks, toys and printed matter provided the bulk of exports.