The role of private initiative in Portugal’s future

Social economy with an increasingly relevant mission

In a context of growing scarcity of public resources and new priorities such as investment in defence, it is clear that Portugal’s true social sustainability will increasingly depend on the role of the social sector and private funding. Traditional philanthropy will remain essential, but it must be complemented by impact investment mechanisms that bring efficiency, scale and long-term commitment. Strengthening the social economy, supporting organisations working on the ground, and encouraging funders to adopt clear and focused strategies are crucial steps to ensure that fundamental rights such as healthcare, education, housing and dignified ageing are not compromised.

Depleting public resources put social and economic rights at risk

We are living through uncertain times, but above all a period of scarcity of public resources to tackle the growing number of socio-economic problems, both globally and nationally. In a country with a strong social heritage such as Portugal, we are now witnessing a shift in public discourse regarding priorities and the availability of capital to finance access to rights estblished in the Constitution. Every day, we see far too many citizens prevented from accessing economic and social rights—such as housing, healthcare, or education—because the State lacks the capacity to fund the necessary conditions for these rights to be fully guaranteed and accessible to all.

The social implications of prioritising investment in defence

One of today’s central issues is defence. Portugal has committed, under NATO, to allocate 5% of its GDP to this area by 2029. This commitment implies one of two options: raising taxes (placing a heavier burden on families and businesses), or making substantial cuts in other structural sectors.

I do not intend here to express an opinion on whether or not investment in defence is necessary. I simply wish to use this subject, currently regarded as a priority, as an example of how our public resources, already insufficient to safeguard all social rights, will become increasingly scarce. In doing so, I aim to highlight how private funding and the work of social economy organisations are, and will continue to be, ever more important to social balance as a complement to public solutions. I therefore reflect not only on the importance of the social sector, but also on some of the approaches that could help strengthen it.

To grasp the scale and implications of our commitment to defence, 5% of Portugal’s GDP represents a total commitment of more than €14 billion to be invested in the defence industry. It is important to note that Portuguese public expenditure in 2024 amounted to around 35–40% of GDP. Thus, speaking of 5% of GDP is in fact speaking of 10–15% of national public expenditure, which necessarily implies cuts to current public spending in other structural areas of our society.

By way of comparison, in 2024 the planned public expenditure in other areas was:

• Health: 19% of public expenditure | €17.3 billion
• Education: 12% | €11.1 billion
• Social Protection: 15% | €13.5 billion

Considering a reduction in investment in any of these areas to make room for defence spending would necessarily mean subjecting citizens to even more precarious public services, rather than better quality and accessibility, in a country that is already among the most ageing and poorest in the European Union. I therefore dare to make the logical leap that this new priority is likely to contribute to the worsening of the difficult social problems we face today.

The importance of private initiative in the social economy

In the wider public debate on the scarcity of public resources, the role of private initiative in various areas of our economy is often mentioned as a solution. However, it is far less common to hear hopeful discussion about private initiative focused on the work of third sector organisations, the ones on the ground addressing the social gaps left by the economy and the public sector, and who almost always operate in the shadows.

Empowering and strengthening the social sector, which in 2021 was represented by around 68,000 entities, requires diversified funding and resources. Social investors, that is, companies and foundations, play a crucial role in filling the gap left by insufficient public funding.

Although impact investment, this is, financing mechanisms for social impact solutions that combine financial return with social outcomes, has been discussed in Portugal for more than 15 years, the social sector is still mainly financed through traditional philanthropy.

Traditional philanthropy is too important to be considered replaceable. That is not the purpose when we talk about impact investment. Its relevance lies in complementing the current funding dynamic. It brings new incentives for efficiency (resource management) and effectiveness (tackling of problems) for some organisations on the ground, while also enabling new investors and additional capital to be mobilised for social causes.

However, beyond discussing financing instruments that complement traditional philanthropy, it is also worth reflecting on how social investors, particularly foundations, can (and should) strategically position themselves in order to play the role that society needs them to.

Social investors more invested in solving social problems

Social problems are complex and deep-rooted, and as such, it is essential to ensure cohesive, long-term strategies to tackle them. We often expect social organisations to make this long-term commitment to their mission, which is itself usually focused on a specific issue. However, on the funders’ side there is still a certain dispersion of interests and a lack of strategy in their positioning as actors contributing to the resolution of society’s most pressing problems.

A strategy focused on concrete, well-defined problems allows social investors to study and quantify them, setting out their ambition for contributing to their resolution. Just as a social organisation is expected to measure the impact of its actions through concrete metrics, it would also be beneficial for social investors to do the same, enabling them to manage their impact over time.

A social organisation works with a long-term and almost always indefinite horizon. Social investors, by working side by side with these organisations, would strengthen the ecosystem if they too adopted long-term commitments to tackling structural social problems, rather than continuing to create short-term funding programmes, which still often happens.

A social organisation should know its beneficiaries well, ideally developing services focused on addressing the root causes of the social problem at hand. In the same way, a social investor should also study carefully the organisations it supports and collaborates with, in order to develop an offering of financial and non-financial services that meet their needs, thus reinforcing the existing social sector.

Defending Portugal depends on us all

At Maze, as an organisation working with both social organisations and impact investors, we witness first-hand the funding challenges across the ecosystem. We also have the privilege of observing how impact investors are increasingly challenging themselves to act with greater strategy and intention. Some concrete examples of foundations on this path, and with whom we have collaborated, include the Calouste Gulbenkian Foundation, strongly focused on solutions in the fields of environment and social exclusion, the Ageas Foundation, dedicated to health and longevity and the Santander Foundation, with a focus on education.

As Portugal prepares to invest billions in defence, we must not forget that the true defence of a society lies in its social cohesion. Fighting poverty, ensuring dignified ageing, making education accessible and guaranteeing affordable housing are the foundations of our stability as a country. That is why we remain committed to working alongside both with social organisations andimpact investors, to continue building stronger structures and creating positive impact.

At Maze, this social defence is what drives us. Our core mission is to contribute to the development of solutions that tackle society’s greatest challenges. If you would like to know more about the work we do with foundations and philanthropic partners, please get in touch at rita@maze-impact.com.

References

https://pt.countryeconomy.com/governo/pib/portugal

https://transparencia.gov.pt/pt/orcamento-do-estado/previsao/despesa-receita-previsao/

https://visao.pt/exame/2021-04-16-uma-em-cada-dez-organizacoes-e-do-setor-social/?utm_source=chatgpt.com