JOHANNESBURG, Oct 20: Israeli Deputy Prime Minister Ehud Olmert on Wednesday signed an investment treaty at the start of a visit slammed by pro-Palestinian groups as a retreat from the struggle for equality embraced by President Thabo Mbeki's government.

Mr Olmert and South African Trade Minister Mandisi Mpahlwa hailed the accord as a sign of closer relations during a ceremony held at a conference center under heavy police presence.

Several protesters representing pro-Palestinian groups, unions and the Movement for Landless People had massed outside the conference center earlier in the day to denounce the agreement as a sell-out by the African National Congress (ANC) to Israel.

Olmert, the most senior Israeli official to visit South Africa since the end of apartheid a decade ago, acknowledged that the conflict with the Palestinians was a sore point in South Africa.

"When I go back, I will report on a certain degree of discontent which was expressed on the street but also a much greater sentiment to create a much closer relationship," said Olmert, who is also trade and industry minister.

His counterpart Mpahlwa said the investment protection treaty "will perhaps give new shape" to the relationship between South Africa and Israel. "For too long, not much has happened between our governments," he said.

Waving placards that read "Israel and Zionism Equals Racism" and "Isolate Apartheid Israel", the protesters charged that Mbeki's government was engaging in double-play by slamming Israel politically but encouraging trade tries for financial gains.

Olmert underlined that Israel was "determined to make every possible effort, at a great political cost, to move forward fast to change realities."

"No one in my country is happy with terror. We want to stop this. We want to eventually reach a stage where we and the Palestinians can find a peace treaty and the Palestinians can exist in their own independent state alongside Israel.

Trade between the two nations stood at four billion rand (633 million dollars/ 502 million euros) in 2003, while trade in diamonds alone over four years stood at 4.4 billion rand, the South African trade minister said.

Earlier Wednesday, protestors gathered at Johannesburg's main convention centre roundly criticised Olmert.

Naeem Jeenah, spokesman for the Palestine Solidarity Group, said: "He is the most racist of all Israeli politicians. When he was mayor of Jerusalem he literally ordered the ethnic cleansing of Palestinians."

He said the visit signalled a "reversal to apartheid times, when the two apartheid states in the world enjoyed a close relationship."

Since it swept to power with the end of apartheid in 1994, the African National Congress, Africa's oldest liberation movement, has taken a decidedly pro-Palestinian stance, harshly criticising Israel for building settlements in the Palestinian territories.

But Mbeki's government has been warming up to Israel, inviting members of the governing Likud Party to talks in Pretoria last month and offering to share South Africa's experience of reconciliation.

South Africa's main trade union COSATU said the investment agreement would "further embolden the Israeli regime and strengthen its determination to defy worldwide condemnations of the brutal policies they have inflicted on the people of Palestine."-AFP