11th October 2023

Dear <<First Name>>

The political paradoxes affecting my beautiful country never cease to astound me. Before 1994, October 10th was a public holiday commemorating the birthday of Afrikaner hero Paul Kruger. It was therefore ironic that the Government Employees Pension Fund (GEPF) chose this day to announce an ambitious social engineering initiative.

GEPF chairman Dondo Mogajane, a former Treasury Director-General who is now the CEO of the Moti Group, used the occasion to unveil the pension fund's "Transformation Policy." The focus is on directing its R2.3 trillion in assets towards "delivering positive financial and social service outcomes for South Africa’s previously disadvantaged populations."

Given the pre-1994 predominance of Afrikaners in the public sector, a sizable chunk of GEPF's assets are actually owned by members of the population group which, by definition, will be excluded from any of this largesse. To wit, the yield on their retirement fund will be consciously sacrificed to support the ANC's social engineering experiment—announced on Kruger Day, no less.

There are many ways to support people who have not enjoyed equal access to opportunities. Doing so successfully, however, requires more than superficial, first-level thinking. To simply sacrifice growth on retirement savings is a slippery slope, one that could require bailouts from future taxpayers.

The ultimate irony, though, is the unintended consequence of such initiatives. Artificial stimulus rarely leads to more than a temporary advantage. Financial prejudice triggers resilience in those affected, who tend to work smarter and harder to overcome it, thus generating permanent benefit. Ask immigrants. Or the Jews.

Sterkte.

Alec

From the FT: Office space vacancies in US and London reach 20-year highs

Large multinationals are hold off committing to real estate deals as working patterns remain in flux with work-from-home becoming more entrenched - watch out landlords  

By Akila Quinio of The Financial Times

Demand for office space has slumped further, with vacancies reaching at least 20-year highs in the US and London, as people continue to work from home despite companies’ attempts to get staff back in the office after the Covid-19 pandemic.

Vacancy rates have risen to fresh highs and investment in offices fell sharply in the third quarter this year compared with the same period in 2022 in London, New York and San Francisco, according to preliminary data from CoStar, a research company focused on commercial real estate.

The sustained slowdown in the office market comes as higher borrowing costs and low occupancy are compressing building valuations while companies including Amazon, BlackRock, Lloyds Banking Group and JPMorgan have in recent months introduced staff attendance mandates on given days.

“The big ticket transactions [are] really not happening at the moment,” said Mark Stansfield, director of UK analytics at CoStar. “There is still a divide of expectations between sellers and buyers.”

Jonathan Gardiner, head of real estate agent Savills’ central London office agency, said large companies were holding off pulling the trigger on real estate deals because they were “still trying to understand their spatial needs” as working patterns shift from Covid-induced work from home to hybrid working and an increase in mandated office attendance.

Vacancies in San Francisco offices hit a two-decade high and reached a 20 per cent rate in the third quarter — up from 6.3 per cent at the onset of the pandemic. The Californian tech hub only generated £454mn worth of investment in office space in the period, less than a third of its pre-pandemic average.

“Places like San Francisco have been hit particularly hard given the level of hybrid working and levels of tech occupation over there,” said Stansfield. Tech workers have embraced remote working more than other office workers, according to analysts.

Investment in London rebounded slightly to £2bn in the third quarter thanks to a flurry of deals in the City fuelled by appetite for green, modern and newly refurbished offices in central London which are in short supply. However, it remains far below its pre-pandemic levels and more than a fifth lower year on year.

The tech and media sectors historically boosted London’s office take up, but companies in those industries are shedding space as they experience slower growth, said Gardiner. London’s vacancy rate hit 9 per cent in the third quarter, the highest since CoStar started recording the data in 2003.

The picture in New York was similarly grim in the third quarter, according to CoStar data. Investment in the city’s offices fell by 60 per cent on the previous quarter while its vacancy rate remained at 13.4 per cent, hovering near a two-decade high.

In a positive sign for the commercial real estate sector, leasing showed signs of renewed activity in the third quarter. Large deals in London’s City and West End drove a 19 per cent quarterly jump in leasing activity in the UK. In the US, leasing activity rose by 13 per cent overall despite falling in San Francisco.