By Nqobile Dludla

JOHANNESBURG, July 20 (Reuters) - South Africa's opposition Democratic Alliance has proposed legislation to overhaul the governance of the Public Investment Corporation, saying the state asset manager's latest leadership crisis shows the need to remove political influence over its board.

The corporation faces mounting scrutiny after Chief Executive Patrick Dlamini was suspended pending an investigation into allegations raised by a whistleblower. South Africa's financial regulator has also launched a governance probe.

The asset manager's board has given no details of the claims and has said the suspension did not amount to a finding of wrongdoing. Dlamini could not be reached for comment.

The Public Investment Corporation (PIC) manages more than 3 trillion rand ($182 billion) in assets on behalf of government employees and is one of Africa's largest asset managers.

The DA's Mark Burke said in a statement on Monday that the party had submitted its proposed Pension Protection Bill to parliament's constitutional and legal services and planned to formally table it after receiving legal feedback.

The DA has 87 or about 22% of seats out of a total of 400 in the national assembly.

Under the proposal, Parliament's Standing Committee on Finance would appoint an independent selection panel to shortlist candidates for non-executive director positions. The panel would recommend candidates to the finance minister based on merit and the skills required by the board.

While the minister would retain the power to reject nominees, he or she would be prohibited from appointing directors not recommended by the panel. Executive directors would be appointed by the board rather than the minister, while the board would elect its own chairperson from among its non-executive members.

"Pension investments are supposed to be boring. They're not supposed to be political," Burke said. "The Pension Protection Bill seeks to rectify an unacceptable situation that has cost public servants billions."

The changes would directly affect the current governance structure, under which Deputy Finance Minister David Masondo serves as PIC chairperson. The bill would also bar anyone holding political office, or who had done so within the previous three years, from serving on the board.

The Democratic Alliance argues that the current arrangement undermines the institution's independence and has contributed to recurring governance failures at the PIC.

($1 = 16.5179 rand)