Black tax: Outdated or creating generational wealth?
It’s no secret that Namibians have been facing a lot of economic pressure in recent times. From rising fuel and food prices to increasing interest rates on mortgages and all other loans, it’s clear to see that households have to dig ever deeper into their limited pockets to get by.
It is in trying times that the age-old debate about the practice popularly known as ‘black tax’ tends to resurface. This is the idea that black professionals and entrepreneurs are obligated to provide financial support to their extended families on a continuous basis.
The practice has always been a highly contested one, with two main groups of thought pushing against each other for widespread acceptance. The first group of thought is inseparable from African cultures all over the continent, and forms part of the widely admired philosophy of Ubuntu: “I am because we are”. This group not only believes that black tax is an admirable responsibility of adult life, but that it also results in future benefits for them once the recipients have been empowered to earn an income for themselves. Some go as far as to say that black tax is essential for Africans to create generational wealth.
The second group, which is growing in numbers, thinks the exact opposite. They believe that the practice represents only a burden: An outdated, unfair weight placed on a historically disadvantaged group that gets in the way of them creating wealth for themselves and their immediate families.
This belief is especially popular among young professionals entering the workforce and trying to find their feet, and it is difficult to blame them.
So, is black tax outdated?
When considering this question, it is important that we ask ourselves whether black tax arises from choice or because of necessity. Psychology suggests that most people avoid being burdensome to others, so if they have other viable options to be more self-sufficient, they are likely to explore them instead of relying on assistance.
When considering Namibia in particular, a close look at household dynamics reveals just why black tax continues to be prevalent.
According to the 2015/16 Namibia Household Income and Expenditure Survey (NHIES), we have an extremely young population. 66% of the population is under the age of 30 years and only 11.9% of people in Namibia are over the age of 50.
This would not be a problem if we did not also have one of the highest youth unemployment levels in the world, which is quickly approaching the 50% mark. We have a young population with limited savings and assets, and almost half of them are not earning a steady income. That creates an unavoidable cycle of dependency, in which one half of earners is supporting the other half of dependents.
These dependencies are far more noticeable in rural areas, which make up most Namibian households and are almost entirely black. Out of these rural households, 59% list pensions, subsistence farming, grants or drought receipts as their main sources of income. These sources are either small or inconsistent in nature.
The opposite is true for urban households, with 72% listing salaries and wages as their main income source. In a predicament like that, it is unavoidable that black professionals in urban areas must provide some support to their families in rural areas. So, in the short- and medium-term in Namibia, black tax is here to stay.
But is black tax creating generational wealth for black Namibians?
The answer to that is a little complicated. It is undeniable that black tax has been instrumental in lifting many Africans out of poverty. One of the most common examples of this relates to education. Education is one of the primary areas to which black tax money flows, with black people helping extended family members finish schooling by assisting financially.
The importance of this contribution cannot be emphasised enough, because education is the primary equaliser when it comes to addressing inequality. This is especially important in Namibia, where only 8% of households report receiving outside financial assistance for educational purposes, such as scholarships.
One of the challenges we currently face in Namibia is that education does not guarantee employment. The elevated unemployment levels mean that the returns on black tax end up being minimised, and continues the cycle of dependency.
Finally, when considering generational wealth, the single most important factor is accumulating assets that can be passed down to future generations. In its current state, black tax is usually used to support subsistence-related expenditure such as food, clothing, education and healthcare. This means it does not directly go towards acquiring productive assets, which are far more expensive.
Therefore, even though it is undeniable that black tax has helped many out of poverty, it is not an effective mechanism for creating generational wealth.
It is in trying times that the age-old debate about the practice popularly known as ‘black tax’ tends to resurface. This is the idea that black professionals and entrepreneurs are obligated to provide financial support to their extended families on a continuous basis.
The practice has always been a highly contested one, with two main groups of thought pushing against each other for widespread acceptance. The first group of thought is inseparable from African cultures all over the continent, and forms part of the widely admired philosophy of Ubuntu: “I am because we are”. This group not only believes that black tax is an admirable responsibility of adult life, but that it also results in future benefits for them once the recipients have been empowered to earn an income for themselves. Some go as far as to say that black tax is essential for Africans to create generational wealth.
The second group, which is growing in numbers, thinks the exact opposite. They believe that the practice represents only a burden: An outdated, unfair weight placed on a historically disadvantaged group that gets in the way of them creating wealth for themselves and their immediate families.
This belief is especially popular among young professionals entering the workforce and trying to find their feet, and it is difficult to blame them.
So, is black tax outdated?
When considering this question, it is important that we ask ourselves whether black tax arises from choice or because of necessity. Psychology suggests that most people avoid being burdensome to others, so if they have other viable options to be more self-sufficient, they are likely to explore them instead of relying on assistance.
When considering Namibia in particular, a close look at household dynamics reveals just why black tax continues to be prevalent.
According to the 2015/16 Namibia Household Income and Expenditure Survey (NHIES), we have an extremely young population. 66% of the population is under the age of 30 years and only 11.9% of people in Namibia are over the age of 50.
This would not be a problem if we did not also have one of the highest youth unemployment levels in the world, which is quickly approaching the 50% mark. We have a young population with limited savings and assets, and almost half of them are not earning a steady income. That creates an unavoidable cycle of dependency, in which one half of earners is supporting the other half of dependents.
These dependencies are far more noticeable in rural areas, which make up most Namibian households and are almost entirely black. Out of these rural households, 59% list pensions, subsistence farming, grants or drought receipts as their main sources of income. These sources are either small or inconsistent in nature.
The opposite is true for urban households, with 72% listing salaries and wages as their main income source. In a predicament like that, it is unavoidable that black professionals in urban areas must provide some support to their families in rural areas. So, in the short- and medium-term in Namibia, black tax is here to stay.
But is black tax creating generational wealth for black Namibians?
The answer to that is a little complicated. It is undeniable that black tax has been instrumental in lifting many Africans out of poverty. One of the most common examples of this relates to education. Education is one of the primary areas to which black tax money flows, with black people helping extended family members finish schooling by assisting financially.
The importance of this contribution cannot be emphasised enough, because education is the primary equaliser when it comes to addressing inequality. This is especially important in Namibia, where only 8% of households report receiving outside financial assistance for educational purposes, such as scholarships.
One of the challenges we currently face in Namibia is that education does not guarantee employment. The elevated unemployment levels mean that the returns on black tax end up being minimised, and continues the cycle of dependency.
Finally, when considering generational wealth, the single most important factor is accumulating assets that can be passed down to future generations. In its current state, black tax is usually used to support subsistence-related expenditure such as food, clothing, education and healthcare. This means it does not directly go towards acquiring productive assets, which are far more expensive.
Therefore, even though it is undeniable that black tax has helped many out of poverty, it is not an effective mechanism for creating generational wealth.
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