* Prominent businessman says Israeli policies "suicidal"
* Says it's now or never for two-state solution
By Tom Perry
RAMALLAH, West Bank, Nov 23 (Reuters) - Israel must make peace now with the Palestinians or become an "apartheid" state that will one day need "a Palestinian Mandela" to take over, Munib al-Masri, a leading figure in Palestinian society, said. Masri, a prominent businessman respected across the Palestinian political spectrum, said the idea of a Palestinian state emerging alongside Israel would soon vanish without a swift halt to Israeli settlement building on occupied territory.
"Everything is going towards this apartheid rule," he said, referring to the racial segregation system by which South Africa was run until 1994. "I hear and appreciate the peace voices in Israel but it's not enough. We need more voices," Masri said.
Masri, 74 and one of the wealthiest men in the Palestinian Territories, was asked three times to become prime minister by the late leader Yasser Arafat, but always declined the job.
Today, as an independent, he is taking a leading role in efforts to promote reconciliation between the rival Palestinian groups -- the Islamist Hamas and more secular Fatah. He said the task was very difficult, adding: "It's my obsession."
From its outset, Masri backed the Middle East peace process which the United States is trying to revive, taking part in the 1991 Madrid peace conference and two years later setting up a holding firm to help build state infrastructure.
The latest U.S. push in the two-decade-old peace process is stumbling over the issue of Jewish settlement building on the land where the Palestinians aim to establish their independence.
"I hope, for everybody's sake, the United States can still do something," Masri told Reuters. "The attitude of Israel has to change. They have to share the cake."
The Palestinians say settlement construction must stop before negotiations resume. The settlements in the occupied West Bank surround and divide the main Palestinian towns.
Israeli Prime Minister Benjamin Netanyahu has so far resisted calls to impose new curbs on the construction following the expiry of a 10-month freeze in September, saying the issue never hindered previous peace talks.
Settlements, Masri said, would render Palestinian statehood impossible. That outcome will be bad for Palestinians but "suicidal" for Israel, Masri said. "They are shooting themselves in the foot and more," he said.
Israel will find itself fully responsible for ruling a growing Palestinian population and its idea of a Jewish state would vanish in the face of demographic changes, with the Arab Palestinian birth rate outstripping that of the Jews, he said.
"(It will become) an apartheid regime, no matter what you say about it, and Israel will be begging to find a Palestinian Mandela to take responsibility for ruling the country," he said.
Nelson Mandela's release from prison in 1990 helped secure a peaceful transition from apartheid to majority rule in South Africa.
(Editing by Peter Millership)