The sharpest political scandal in 30 years of National Party rule has burst on South African Prime Minister P. W Botha, who has been in office less than five weeks, with press revelations that secret government funds were used to finance a progovernment newspaper and to prop up an unnamed private company.

The news that money allocated secretly to the Department of Information, formerly headed by Minister of Black Affairs, Connie Mulder, financed the English-language The Citizen newspaper is expected to have major repercussions within the party, which dominates the all white Parliament. The party's more moderate faction led by Foreign Minister Pik Botha, undoubtedly will use the scandal to erode the power of the more hardline wing, in which Mulder is a major figure.

For 18 months, both Afrikans and English-language newspapers have been investigating allegations that The Citizen was financed by government money but until now have not printed any reports because of South Africa's stricl libel laws. The news revelations therefor apparently mean the papers, the Sunday Express and the Rand Daily Mail, have access to documents supporting the claims.

On Sunday, the Express reported that The Citizen - which has gained a reputation for a hard-hitting attacks against South Africa's critics and as a forum for views of the Department of Information - was started in October 1976 with money from Mulder's Department by a secret Cabinet committee which included former prime minister John Vorster and his successor, P. W. Botha, the Express said.

Tr for ad one.

The money was intended to be used in secret diplomatic and public relations efforts to counter the "onslaught" against South Africa's policy of racial segregation known as apartheid. Earlier this year, papers reported that some of the money was squandered in private jaunts to the Seychelle Islands by information Department officials and to pay journalists to write favorable stories.

The reports cause da furor in South

These projects, directed by the former secretary of information, Eshel Rhoodie, were criticized by a parliamentary committee and led to the scrapping of the department. The move taken by Vorster, was a major blow to Mulder's standing in the party and hurt his chances to succeed to the premiership.

There are indications that the scandal may also implicate Gen. Hendrik Van den Bergh, former head of South Africa's Bureau for State Security, this country's equivalent of the CIA. The reports were not clear on how Van den Bergh might be involved. He was a close friend of Rhoodie and a bitter enemy of the present premier P. W. Botha. He announced his resignation from the bureau a few days after Vorster said he would step down.

Originally, The Citizen's founder and owner was said to be South African fertizee magnate, Louis Luyt, who now appears to have been a front man for the Department of Information when he began the paper in October 1976. Early this year, Luyt sold the paper to so-far unnamed South Africans interests and to four foreign entreprenuers who include two Americans - Dallas attorney David A. Witts and Saturday Evening Post publisher Beurt Servaas.

The foreign shares amounted to 25 percent of The Citizen's capital, according to press reports.

Launching of the paper was an attempt to gain government support among South Africa's English-speaking population, which has been woed in recent years by the National Party Afrikans-speaking whites dominate the party.

When reports of the secret fund first broke last May, Mulder defended their use in Parliament but denied that any of the funds were used for The Citizen.

The Rand Daily Mail, the most antigovernment South African paper, reported yesterday that in addition to financing The Citizen, almost $15 million of the taxpaper-supplied secret money was funneled into an unnamed private company. This money, the newspaper reported in a front-page story has "disappeared."

The latest revelations were made by Retief van Rooyen, who first gained prominence by defending the security police last November at the inquest into the death of black consciousness leader Steve Biko. Van Rooyen later contested apartheid foe Donald Woods in Washington after a congressional hearing.

Van Rooyen was a partner in a company called Thor that has been linked to the Department of Information. He disclosed the department's funding of The Citizen last month to a group of Cabinet ministers only days before the National Party caucus met to elect a new leader.

Two contenders for that position, Pik Botha and W. botha, who finally got it, were out to prevent Mulder from winning the premiership. Mulder won 72 votes to P.W. Botha's 78 in the first round.

Van Rooyen's information, which he later repeated to a judge investigating currency exchange violations, apparently also prompted Prime Minister Botha's action last week in expanding a Vorster-initiated probe into the propriety of how the secret fund was spent.

Botha appointed a representative of the Department of the Treasury and of Justice as well as of the new Informations Department, now under the Foreign Ministry, to the investigating committee. The latest appointees signal a closer look at alleged exchange control violations and raise the possiblity of criminal prosecution.

So far, Mulder has refused to comment on the latest allegations, but if they are upheld by the government investigators, he stands to lose his politcal position in the party, which only 18 months ago was that of a "crown prince" pegged to succeed Vorster. He might also face criminal prosecution on charges of currency violations.

The beleaguered Citezen today, in a front-page commentary yesterday, wrote that "the muckraking little Sunday Express . . . one day we will write its epitaph. But it wont be rest in peace."