Mr Pahad's appointment as special minister to the president, or a similar title, is expected to be announced today ahead of an extravaganza for President Mandela, including an African musical spectacular in the capital, Pretoria.
The government said to be chosen by Mr Mbeki after the African National Congress's landslide election victory on 2 June points to a top-heavy structure that may be criticised as too centralised. However, Mr Mbeki has pledged to move the government closer to the people. "We urge members of parliament to reach out more regularly to the electorate,'' he said.
The Inkatha Freedom Party leader, Mangosuthu Buthelezi, is believed to have been offered the deputy presidency. But it is not known if he has accepted the post, which will be largely ceremonial if Mr Pahad's role is confirmed.
Mr Pahad was a comrade in exile to Mr Mbeki during the new South African president's studies for a masters degree in economics at Sussex University in 1966. He was also best man at Mr Mbeki's 1974 wedding in London. They will now be seen as a double act, heading a president's office whose size and powers will be expanded as at least three minor ministries are scrapped.
But today's cabinet announcement will be completely overshadowed by the 47 million rands (pounds 4.7m) that most people consider well spent on President Mandela's farewell. Representatives of nearly 100 countries will pay tribute in Pretoria to the retiring 80-year-old President. Britain is sending the Deputy Prime Minister, John Prescott, while Tony Blair is occupied with a G8 summit in Cologne.