It said the consortium had formed a new company, LaurentinaCervejasSARL, which would invest a further $10 million to modernise and expand Fabric as de Cervejas Reunidas de Mocambique.

The three foreign partners would have a controlling stake of 51 per cent while a group of Mozambican investors would hold 29. Workers and management would hold the remaining 20 per cent, said Benjamin Alfredo, a consultant with the consortium.

He said the deal completed the privatisation of the brewing industry in Mozambique, which started two years ago with the sale of breweries in the capital Maputo and the Port city of Beira to SouthAfrican Breweries. A new brewery owned by a Portuguese firm in Nampula province was also sold off.

Before the government started its privatisation process under reforms aimed at jump-starting an economy ravaged by a 16-year civil war, Mozambicans had to make do with expensive beer, most of it imported illegally from neighbouring countries and former colonial master Portugal.

"There are a lot of illegal imports although that's coming down now with privatisation in customs and SAB has been supplying the market for a couple of years," said Edward Farquharson, CDC investments manager for southern Africa.

"It's a pretty unexploited sector," Farquharson told Reuters in a telephone interview from London.

Prior to SAB's entry into Mozambique, the three state-owned breweries were struggling with their antiquated machinery to meet local demand estimated at 1.2 million hectoliters a year.

With new capital injections, the industry promises "significant earnings" for investors as well as for the government ofpresident Joaquim Chissano.

"There's growth in Mozambique's beverage industry since the government decided to privatise. There's potential for good development in this area," Alfredo said in a telephone interview from Maputo.

The new company was aiming to increase production to 2,50,000 hectoliters per year from 100,000 hectoliters now, and raising it to 400,000 hectoliters in the next four years, he said.

Laurentina aimed to corner a significant share of the local market and challenge rival SAB, which supplies half of the 1.2 million hectoliters of beer which Mozambicans drink annually, he said.

"Laurentina plans to also export to other countries in the region and overseas eventually. The Mozambican economy is growing and it's natural that the beer market will grow with the economy," Alfredo said.

Mozambican consumers, who have over the past two years had a limited choice of imported beers from South Africa and Portugal to quench their thirst, will have a wider range with the new company planningto brew three well-known brands.

Laurentina will continue to produce the popular local beer that it derives its name from -- Laurentina Cervejas -- along with the Guinness Foreign Extra Stout and Castel brands.

"So far the market was basically controlled by SAB and some beer imported from Portugal. We will provide a wider range of choice for consumers. Laurentina is the only brand we can say is genuinely Mozambican and it's recognised internationally," said Pedro Pinto, CDC country manager for Mozambique.

The southern African country, one of the world's poorest countries, recently won praise from the World Bank for sticking with economic reforms which have seen its gross domestic product grow by 12.4 per cent in 1997 -- albeit from a very low base.

It has also put the brakes on in inflation, which fell to 5.8 per cent in 1997 from 70 per cent in 1994.

"Mozambique is increasingly raising its profile as an interesting investment area. Its macro-economic situation has stabilised," said the CDC'sFarquharson.