"It is not merely the passing of the baton from one president to another, a transition from the so-called Mandela era to the Mbeki era, but indeed a significant changing of generations," Mr Mandela said.

He was speaking at a farewell banquet, at the end of a day which saw Mr Mandela's official retirement - and Mr Mbeki's installation as South Africa's second democratically-elected president.

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In front of a huge crowd gathered at the Union Buildings in Pretoria, President Mbeki took the oath of office before standing alongside Mr Mandela for a 21-gun salute.

The two men gripped hands and held them above their heads in a victory salute as the crowd cheered loudly.

Above them air force jets performed a fly past trailing red, blue, yellow and green smoke - the colours of the South African flag.

Around 4,500 people were gathered in the amphitheatre of the Union Buildings, with thousands more on the lawns below.

Representatives from 130 countries attended the ceremony, including 30 heads of state. Guests included many allies of the ANC, such as Palestinian leader Yasser Arafat, Libya's Colonel Muammar Gaddafi, and Namibian President Sam Nujoma.

Mr Mandela appeared weary as he watched the swearing in of his friend and colleague, while President Mbeki was trying to shake off the symptoms of influenza.

'A day of salute'

In his inauguration speech President Mbeki paid tribute to the generation of leaders now retiring from the political scene.

Thabo Mbeki takes the oath of office

"It is a day of salute for a generation that pulled our country out of the abyss and placed it on the pedastal of hope," he said.

He said the Mandela era was a beginning, but that the full meaning of liberation would not be realised until people were freed from what he called the "dehumanising legacy of deprivation".

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Mr Mandela became South Africa's first black president in the country's first all-race elections in 1994.

The ANC won another decisive victory in the elections on 2 June this year.

Soweto anniversary

The handover fell on the anniversary of the start of the 1976 Soweto uprising, a turning point in the struggle against apartheid.

The occasion was marked by an outdoor "concert for the people", featuring American singer Jermaine Jackson and South African performers Johnny Clegg and Brenda Fassie.

In a celebratory football match in Soweto, South Africa's national team played against Zimbabwe for the Presidential Inauguration Cup - and lost to their northern neighbours.

Retirement plans

Moments in the life of Nelson Mandela

Mr Mandela and his wife, Graca Machel, are reportly about to leave on a holiday outside of South Africa.

The former president has said he wants to "retire into obscurity", and spend time with his grandchildren.

He says he will divide his time between South Africa - where he has built a house in his home village of Qunu in the Eastern Cape - and his wife's home country of Mozambique.

He has also said he will spend time writing his memoirs.

New government

Watching on the big screen

South Africans will have to wait until Friday for President Mbeki to announce his government.

The delay is because the ANC is still negotiating with the Inkatha Freedom Party on the composition of the cabinet, and control of the volatile KwaZulu-Natal province.