Ntombizamasala Hlophe – Strategy Director, Yellowwood Future Architects
Black tax, in equal measure is both fit and fatalistic. Fit because it is a generational affirmation of the spirit of Ubuntu when you can pay forward the support received within the same lifetime; and yet it has become fatalistic in many ways as it has been attributed with knocking down the chances of building generational wealth. While it is a common practice in many cultures, with black Africans it has become an increasingly burdensome obligation on the income earner to look after a widening list of direct and indirect dependents.
The effect of growing pressure of unemployment on the 90% of South Africa’s population that only have 5% of the wealth* will no doubt be fatal to the fitness of this system of Ubuntu. In truth families should help each other, importantly though families should be able to help each other. What is evident is that our current approach to families helping each other has become fundamentally flawed.
Today’s black tax model is largely a cash transfer system, with an increasingly complex network of dependents and extending list of needs for arguably diminishing base of income. The current model is not fit for purpose. For example, the cohort of children currently in the schooling system in over two decades will without constructive disruption simply replace their parents. By which we mean, secure a job and continue to support their family through black tax and never really get off the starting blocks towards a healthy financial run.
Black Tax could present an unbridled opportunity if we could refine our understanding of how a black family’s wealth is distributed among different age cohorts – from school going children, to the unemployed, the employed and retirees. Unlocking this inherent value in a new model that starts looking at it with the aim of preserving the spirit of Ubuntu; and give the current income earning generations (Millennials / Gen X and Z) a fighting chance at building wealth.
If we reframed the definition of the assets available from the income earner; we could fund Black Tax with financially recognisable resources that enable broader financial participation. By including property assets, access to finance, credit behaviour, access to medical insurance; the resources available to fund black tax could be significantly expanded.
This programme applies the principles of wealth creation, of long-term thinking beyond cash and beyond the individual. It seeks to orchestrate the multiple efforts to reach the family networks surviving on black tax like SME incubators or Education funders with a more co-ordinated approach.
This programme seeks to create households with full access to the financial system through the collective power of all the family members – affordable banking, debt consolidation, insurance against key risks, access to credit and a savings strategy stands the best chance to create wealth.
It would assign a financial adviser to carefully assess each family’s collective financial situation and profile each family member to understand their position in the network and their primary barriers. Then build a family financial plan (over a set period) based on ideals and family ambition. Importantly would be then Allocate family resource balance beyond cash, allowing for example:
Address the indebted with a targeted plan to liberated cash reserves; a family member to enlist a non-dependent to share the medical burdens in the family; focusing those with good credit reputations as surety to an incubator programme for a family business and enabling the unemployed in the family to establish a business that hires the educated but unemployed, as well as the uneducated to build a business that serves the network.
A programme like this requires the recognition of the family network within a financial system; allowing their combined strength to be a viable financial effort rather than a sum of individuals with respective limitations to become a system that realises the true scale of the power of family networks.
Leveraging Financial advisers, banking partners, insurance providers, SME incubators and funders, schooling partners and an integrated digital system to create from Ubuntu a new socio-financial model which champions “greater familial financial inclusion”.
FSPs could gain meaningful access to generational segmentation within a family and use that to leverage tacitly the financial, behavioural, and life-stage attitudes of different generations uniquely for wealth creation.
For all the efforts currently applied to sustaining the current model, efforts towards reforms are worth making because Black Tax could be reformed to be fit for the needs it seeks to provide for, making it less taxing for modern generations.
*StatsSA Income inequality report 2019