South Africa may sell iron ore, BHP stakes worth $3bn

South African citizens are suffering from rolling blackouts, or load-shedding as it is called inside the country, because of years of neglect at state-owned power utility Eskom.

Eskom needs R250 billion ($21 billion) to upgrade its infrastructure and build new power stations, most of them coal-fired, and with a national debt already at 50% of GDP, the government may be forced to sell off shareholdings it has in a number of large companies.

Reuters reports the state could sell shares it owns through the Industrial Development Corporation, which include 8.2% in petrochemicals and coal-to-gas firm Sasol worth $2.6 billion, nearly $2 billion in Kumba Iron Ore and a 1.6% interest in BHP Billiton that could fetch $1.1 billion.

The timing of the sales, should they happen at all since the ruling African National Congress party favours greater state involvement in industry, is not favourable.

Kumba Iron Ore is down 40% over the last year while BHP Billiton has lost more than a fifth of its value over the same period. But waiting much longer may only make things worse.

Predictions are for the iron ore price to fall further and stay low for a protracted time.

BHP relies on iron ore for more than half its earnings while 26% is derived from oil which now have ever worse fundamentals than iron ore so there's likely more pain ahead for the world's top miner.

China, which already owns a chunk of world number two Rio Tinto, could be a potential buyer, but can also afford to wait.

The natural buyer of Kumba, 70%-shareholder Anglo American, is itself on a divestment drive and may not be interested in owning any more of the company.

Anglo picked up its share in the operator of the 60-year old Sishen mine and railway line in 2006 after the unbundling of steelmaker Iscor – the first state company to be privatized in 1989 under the then Apartheid regime.

Image of Arnot Power Station, Middelburg, South Africa by Gerhard Roux