IntroductionDespite the prevalence of mental illness among young adults in South Africa, few studies have examined its correlation with social capital using nationally representative data. Sources of social capital are different for youth, which is why understanding the correlation between family and neighbourhood social capital and mental health outcomes is important for designing optimal interventions. The objective of this study was to examine the relationship between social capital and youth mental health. We also sought to understand whether family social capital was more protective for the mental health of youth compared to neighbourhood social capital. MethodsUsing the National Income Dynamics Survey data for South Africa, we examine these associations among 2307 youth aged 15–24 across the four waves. Multilevel logistic regression was used to examine these associations. ResultsOur findings emphasize the substantial burden of mental illness among youth in South Africa (26% in wave 4). Although results for parental presence were not significant, family social capital measured by household income significantly decreased the odds of incident depression only for those belonging to the third quintile (aOR 0.74, 95% CI 0.54–1.01). High perception of crime in the neighbourhood was associated with significantly higher odds of incident depression (aOR 1.33, 95% CI 1.06–1.67). ConclusionsOur results confirm the independent effect of neighbourhood characteristics on youth mental health and did not support family social capital as being protective for developing depression. This implies that youth program planners must focus on community context in improving youth developmental outcomes such as mental health.