The State Legislature Friday approved a but requiring the divestment of all state pension funds from firms doing business in or with South Africa.

Governor Edward J King is expected to sign the bill into law later this week.

The bill which allows three years to complete divestment requires the sale of just over $100 million is securities from a pool of $1.3 billion invested for the retirement benefits of state employees and public school teachers.

The proceeds of the sales are to be reinvested "as much as reasonably possible" in business operating in Massachusetts, the measure says

Originally introduced in 1979 by Rep Mel King (I-Boston) and State Sen. Jack Backman (1)-Brookline Newton) the bill has been promoted by the Massachusetts Coalition for Divestment from South Africa (MassDivest) a coalition of over 100 labor, civic and religious organization. Two Harvard student groups, the Southern Africa Solidarity Committee and the Hillel Social Action Committee are among the group's members.

Lee Famis of MassDivest yesterday called the bill "the strongest piece of divestment legislation in the country." Connecticut is the only other state with a similar law requiring divestment of pension funds, but the Connecticut law does not apply to firms that adhere to the Sullivan principles, a set of guidelines for non-discriminatory labor practices.

"The bill lifts an immoral cloud from the Commonwealth," King said, "I hope t will provide a guide for other states and other organizations in the state to take similar action," he added.

The passage of the bill culminates an effort begun by King and Bachman in 1978, which has secured the inclusion in each state budget since 1979 a provision forbidding the purchase of new securities in firms dealing in South Africa. The new legislation mandates the sale of securities purchased before that ban went into effect.

As of August, the state held investments in 30 companies doing business in South Africa. Massachusetts largest investments are approximately $7.7 million in J. P. Morgan & Co., $6.8 million in Bank America Corp, and $5.9 million in Republic National Bank.