February 1, 2019 / 3:37 PM / in 4 months

UPDATE 2-Board of South African state pension fund resigns as scandal deepens

* Board resigns after 4 members face graft allegations

* Treasury to name interim board next week

* Current board to stay on until new board is appointed

* PIC is Africa’s biggest pension fund (Adds Treasury comment, details)

By Tiisetso Motsoeneng and Olivia Kumwenda-Mtambo

JOHANNESBURG, Feb 1 (Reuters) - The board of South Africa’s state-owned state pension fund resigned on Friday, citing destabilising allegations of wrongdoing against four directors, as the crisis at the biggest investor in Africa’s most industrialised economy deepens.

The Public Investment Corporation (PIC), which has around 2 trillion rand ($150 billion) of civil servant pensions under management, is facing a judicial inquiry into corporate governance after an opposition party alleged that former chief executive Dan Matjila had misused funds and made careless investment decisions.

The allegations against Matjila, a board member, were followed by a whistleblower who made new graft allegations at the pension fund in an email, implicating three other board members including acting CEO Matshepo More as well as the board’s chairman and deputy finance Minister Mondli Gungubele in impropriety.

Matjila and Gungubele have denied any wrongdoing. More could not be reached for comment.

The board said the allegations were “unbearable to us as individuals” in a letter addressed to Finance Minister Tito Mboweni asking him to release them from their positions.

“Our assessment is that this may not be the end,” the letter signed by nine directors said. “There is clearly a concerted effort to discredit the board of directors to an extent that there cannot be any credibility to the work that is executed in fulfilling its fiduciary responsibilities.”

South African National Treasury spokesman Jabulani Sikhakhane said Mboweni has already started the process of appointing a temporary board.

“Hopefully the interim board will be announced some time next week,” Sikhakhane said.

NEW BLOOD

The current board has offered to continue to work for the fund manager until Mboweni appoints a new board, and said they hoped that would be done on an urgent basis.

Their resignation gives President Cyril Ramaphosa’s administration an opportunity to inject fresh blood in yet another state-owned company with questionable track record of corporate governance.

Last week, the PIC said it had suspended its executive head of listed investments and an assistant portfolio manager over a 2017 investment in Ayo Technology Solutions, which is listed on the Johannesburg Stock Exchange.

The fund said the two were suspended for flouting governance rules in relation to the investment.

The suspensions were followed by three resignations from Ayo Technology Solutions’ board. Reuters has not been able to reach the suspended PIC officials or the Ayo executives for comment.

The technology firm’s share price is down more than 50 percent since it listed on the JSE in 2017, meaning that the PIC’s investment had halved.

Matjila had said last year that the Ayo Technology Solutions deal was a “great investment” that would take time to pay off.

The PIC is the biggest investor in South Africa’s economy, holding a large volume of bonds issued by government and state-owned firms, as well as stakes in blue-chip companies such as miner Anglo American, lender Absa <ABGJ.J and telecoms giant MTN Group ($1 = 13.3553 rand) (Editing by James Macharia, editing by Louise Heavens)

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