Across Western Europe and South Africa, many 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 are facing growing pressure from rising housing costs, higher energy and fuel prices, inflation and ageing public infrastructure. Both regions are seeing how closely social stability is tied to the state’s ability to meet its core obligations.
The manifestations differ. Europe’s historic cities are grappling with youth-led protests and rising homelessness, while South Africa contends with chronic “service delivery protests” and deep structural exclusion. Yet the underlying forces driving this discontent are remarkably similar.
The Death of the Economic Escalator
For decades, the unspoken social contract in Europe was simple. If you studied, worked hard, and played by the rules, you would achieve a comfortable, stable life. Today, that economic escalator 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 (Gen Z) face an economy where wages are stagnant, but the cost of basic existence continues to climb.
In South Africa, the breakdown is even more apparent. The country is grappling with an unsustainably high youth unemployment rate. Education, traditionally a route out of poverty, is also 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 over the same period. That is approximately 46% for primary and 51% for secondary school fees, outpacing cumulative consumer inflation of about 36%.
Families are therefore paying more to educate their children while an economy growing at around 1.1% struggles to create the employment opportunities that would allow young people to translate those qualifications into financial security.
For many young Europeans, the fear is that even a lifetime of work will not deliver the security their parents enjoyed. For many young South Africans, the more fundamental fear is that their working lives may never begin. Years of education can give way to unemployment, dependence on family and the stigma of being labelled an “umahlalela”, left sitting at home despite wanting to work. This is a crisis of dignity as much as income.
In both settings, when qualifications fail to open doors and effort offers no clear route to independence, the promise that each generation can build a better life begins to unravel.
Nowhere are the parallels more visible than in the battle for housing. Access to affordable 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 Lisbon and Madrid, housing costs have outpaced local wages so sharply that youth advocacy groups have set up tent camps in public squares to protest displacement.
Here at home, the South African housing crisis is deeply intertwined with spatial apartheid. In economic hubs like Cape Town and Johannesburg, working-class families are physically and financially excluded from urban centres close to jobs. Instead of tent cities, South Africans face a predatory commute. South African workers routinely spend over 57% of their monthly earnings on transport and electricity alone, leaving only a fraction for food.
Whether it is a student in Europe or a worker in Khayelitsha, the structural reality is the same; the modern economy is forcing the working class to pay a premium just to exist within reach of opportunity.
The South African trifecta of a lack of access to affordable quality accommodation that’s close to urban hubs; poor access to affordable quality education; and deteriorating infrastructure required to grow the economy and grow job creation makes it harder for people to find work and improve their lives.
Where Private Capital Comes In
The warning from Europe and South Africa is that exclusion carries an economic cost that eventually reaches every part of society, including investment portfolios. When people cannot afford to live near work, access quality education, or depend on basic infrastructure, the foundations of growth weaken alongside public trust. Rebuilding those foundations requires sustained investment that makes opportunity accessible and restores a credible relationship between effort and progress.
Governments in both South Africa and Europe face tightly strained public finances. Domestically, private capital is needed to help close a funding gap of around R5 trillion.
Addressing housing shortages, infrastructure deficits, and limited access to affordable education requires significant long-term investment. Given fiscal constraints, the government alone cannot provide the capital needed to meet these challenges. 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.
Equally important, they contribute to economic development, job creation, and improved social outcomes, helping to build a more prosperous and inclusive South Africa for current and future generations.
A well-funded retirement means more when it is spent in a country where services function, housing is attainable and the next generation has a credible path to prosperity.
Navina Lala, Client Director – Old Mutual Alternative Investments