And when Freeplay Energy Group was created to build the radios, it decided to hire its workers from among South Africa's disadvantaged: disabled people and ex-convicts.

The venture seemed like a happy combination of goodwill and good business, a kind of Ben & Jerry's of the electronics world. Nelson Mandela cut the ribbon when Freeplay expanded its factory in 1998. Vice President Gore paid a visit last year with a U.S. business delegation.

"Freeplay was always seen as a model of the South African rainbow type of company," said Rob Packham, chief operating officer of Freeplay.

But now, global commerce has collided with social responsibility. Freeplay and its workers have gotten harsh lessons in the law of unintended consequences. The radio intended for the deprived became a toy for the affluent.

To cut costs and speed production, the company this year decided to move most of its manufacturing to Hong Kong and has laid off more than half its South African workers. And it has lost the luster of beneficence that had surrounded it from the beginning.

It was an abrupt awakening for a fairy-tale company, founded less than six years ago by Bayliss, who was inspired to build a simple spring-powered radio that he hoped would improve communications in rural Africa - where batteries are often scarce or costly - and help health workers get out the word about AIDS.

Bayliss developed a mechanism that operates on the same principle as a self-winding watch or an old Victrola. A user turns the radio's crank for about 30 seconds, after which a steel spring slowly unwinds, generating power to keep the radio going for as long as an hour.

Backed by South African businessmen and South African foundation money, the new company set up its works in Cape Town, forming partnerships with organizations that benefit disabled workers and ex-offenders.

The first Freeplay radios were not exactly on the cutting edge of miniaturized electronics. The radio weighed 6 pounds and was the size of a steamfitter's lunch box. Like the Model T, it came in one color - black.

A quality-control inspector tests one of the larger lunch-bucket models.

The first buyers were mostly aid organizations that bought a few thousand to distribute, as Bayliss envisioned, in developing countries. But the radio cost about $80 - far beyond the reach of most Africans. The very component that made it unique - the 30-foot-long steel spring, installed by hand - also made it expensive.

"The biggest irony is the very guys it was designed for can't afford it," Packham said. "Life is full of ironies."

But the radio caught on in developed countries, particularly among environment-conscious consumers and outdoors enthusiasts. The Freeplay may have been bulky and ugly, but it was politically correct.

Backed with investments from the General Electric Co. pension trust - it now owns a third of Freeplay Group - and T. Gordon Roddick, chairman of Body Shop International PLC, the company set its sights on the U.S. market.

Encouraged by distributors such as Sharper Image, Radio Shack and L.L. Bean, Freeplay developed smaller versions of the radio and it now comes in trendy, translucent-colored cases and is equipped with solar cells and rechargeable batteries. Freeplay also developed hand-powered flashlights.

The company got another unexpected boost last year when the radios became popular in the United States among Y2K survivalists worried that a millennial meltdown would cause chaos to the power system. Sales surged to $50 million. Freeplay sold 900,000 radios and flashlights.

Although some of Freeplay's radios still go to the developing world - aid agencies distributed 40,000 radios in Kosovo last year and 7,000 in Mozambique this year after floods devastated South Africa's impoverished neighbor - 90 percent of the sales are in industrialized countries, most of that in the United States.

But Freeplay still did not make a profit. And U.S. distributors told the company that they could sell more of the devices, but only if the price came down.

It was pretty clear who was going to lose in any raw comparison of costs. Freeplay pays its South African workers about $1.75 an hour - high by Asian standards. Plus, big Chinese manufacturers can procure parts for much less.

"We knew all along there was a cost problem producing in South Africa," Packham said. "It's not renowned as an electronics-manufacturing center of the world."

So the South African jobs would have to go for the company to survive.

"If we were moving our manufacturing to China, we had to question what that would do to our commitment to social justice," Packham said.

Freeplay's management explained the predicament to employees in February and announced that it would lay off 196 workers, more than half the staff. Freeplay would keep a small factory in Cape Town, but most of the production would move to Asia.

It was a hard lesson in the essential incompatibility of altruism and pure commerce, an especially difficult message to deliver in a place such as South Africa, where hundreds of thousands of jobs have been lost since the walls of apartheid came down in 1994 and the country has exposed itself to world markets.

Workers, represented by the National Union of Metalworkers of South Africa, took to the streets and demonstrated outside Freeplay's offices. They complained that Freeplay's social commitments were a shallow pose designed to establish market share rather than benefit poor workers.

"Clearly, this social responsibility thing is just a farce, as far as I'm concerned," said Karl Cloete, the union's regional organizer. "Most of the disabled and most of the ex-offenders were retrenched."

The protests stung management, accustomed to positive press. "Suddenly we were getting hammered about how bad and ugly and mean we are," Packham said.

The dust has settled since the layoffs and protests, and Freeplay's bottom line has picked up since Chinese workers began producing most of its hand-powered radios and flashlights. But some of the magic at Freeplay's downsized factory has disappeared.

"I know it was a sad and traumatic thing that has happened, but we've become more efficient," said Purcell Lakey, the manufacturing manager at the company's plant in Montague Gardens, an industrial suburb north of Cape Town.

"We're still as committed to those initiatives and core values that we had at the start," Packham said. "At the same time, we're a business that has to make some hard business decisions from time to time."

There may be a bright side to the company's decision. The radios will eventually drop in price, making the devices more affordable for humanitarian organizations to distribute to Africa and developing nations. But the radios will still be too expensive for the world's poor people to buy.

"In developing countries, the person who pays for the radio is not the end user," Packham said. "We're still far away from having a product that will be stocked in every general dealer in Africa."

Meanwhile, the company is exploring new ways to employ the hand-wound power generator it developed for radio.

It is now focused largely on producing a windup device to power a cellular telephone. Its research-and-development staff members, who work in a building where most of the cars have surfboards mounted on the roof racks, also are exploring making self-powered units for laptop computers, medical equipment, and even land mine-clearing gear.

The challenge facing Freeplay's researchers is that a radio is a relatively low-powered electronic device. More power-hungry machines, such as cell phones, will require more efficient windup mechanisms to use the 20 watts of power a person can generate in half a minute of cranking.

"Ultimately, we don't see ourselves as just in the radio business," Packham said. "We're in the energy business. Our objective is to put power into the hands of the people."

More information on the company can be located through www.freeplay.net