Across Western Europe and South Africa, people are finding it harder to make ends meet and feel secure about their future. Despite their different histories, levels of wealth and institutions, both regions face growing pressure from rising housing costs, higher energy and fuel prices, inflation and ageing public infrastructure. The manifestations differ, with Europe's historic cities grappling with youth-led protests and rising homelessness, while South Africa contends with chronic "service delivery protests" and deep structural exclusion.
In South Africa, the breakdown is apparent, with an unsustainably high youth unemployment rate. Education, traditionally a route out of poverty, is becoming harder to afford. According to the Competition Commission, public school fees over six years rose on average by approximately 6.5% per annum for primary school, and 7.1% for secondary school fees, both well ahead of consumer inflation. This increase outpaces cumulative consumer inflation of about 36%, making it difficult for families to educate their children.
The economic escalator that once allowed people to achieve a comfortable, stable life by studying, working hard, and playing by the rules has broken down. In Europe, driven by the lingering effects of global energy shocks and supply disruptions, a severe cost-of-living crisis has eroded household purchasing power. Young Europeans face an economy where wages are stagnant, but the cost of basic existence continues to climb. In South Africa, the fear is that working lives may never begin, with years of education giving way to unemployment and dependence on family.
The battle for housing has become the primary battleground for civic dignity. In Europe, the pressure is most acute in Spain, Portugal and Italy, where local populations are being priced out of their own cities. In South Africa, the housing crisis is deeply intertwined with spatial apartheid, with working-class families physically and financially excluded from urban centres close to jobs. Instead of tent cities, South Africans face a predatory commute, with workers routinely spending over 57% of their monthly earnings on transport and electricity.
The South African trifecta of a lack of access to affordable quality accommodation close to urban hubs, poor access to affordable quality education, and deteriorating infrastructure required to grow the economy and job creation makes it harder for people to find work and improve their lives. Rebuilding foundations requires sustained investment that makes opportunity accessible and restores a credible relationship between effort and progress. Governments face tightly strained public finances, making private capital necessary to help close a funding gap of around R5 trillion.
Bridging this funding gap presents a compelling opportunity for private capital to generate sustainable financial returns while addressing critical social and economic priorities. For long-term investors such as retirement funds and insurers, these structural challenges create an attractive opportunity to deploy patient capital into long-duration, inflation-linked assets. Such investments can provide strong liability-matching characteristics, portfolio diversification, and the potential for attractive risk-adjusted returns.
A well-funded retirement means more when spent in a country where services function, housing is attainable and the next generation has a credible path to prosperity. The warning from Europe and South Africa is that exclusion carries an economic cost that eventually reaches every part of society, including investment portfolios. By addressing housing shortages, infrastructure deficits, and limited access to affordable education, private capital can contribute to economic development, job creation, and improved social outcomes.
Key points
- South Africa faces high youth unemployment and unaffordable education.
- The country struggles with a housing crisis deeply intertwined with spatial apartheid.
- Private capital is needed to address critical social and economic priorities.
