Understanding Black Tax

Growing up in the Tshwane township of Mamelodi, Ivy Shirinda remembers the sleepless nights her grey-haired parents had about money. With three daughters, one job, and no savings, they struggled to put everyone through school.

“The little things that kept them awake at night broke me inside,” recalls Ivy, who’s the youngest of the Shirinda siblings. Every year her parents worried about affording textbooks, but since they believed education was the only inheritance they could afford their children, they persisted.

Ivy was the first child to graduate matric without a child of her own, and she went on to study public relations (PR) at the Tshwane University of Technology. Today, as an account executive for a PR company, she is the main breadwinner in her household.

“I need to ensure that there’s food in the fridge, and that my nephew goes to school with all his necessities. I also need to finance all the other things that are needed in the house. This is not because I’m obliged to do so; it’s because I know what it feels like to not have enough,” she explains.  

Like many young, South African graduates, Ivy carries the burden of Black Tax – an unspoken responsibility to support one’s family and extended family.

Tip: If you've incurred debt while trying to support your family, consider debt counselling. 

What is Black Tax really?

“Black Tax is about being the main peanut in the packet and making sure that all the other peanuts have the same taste as the main peanut. It ensures that everyone has what they need and sometimes a bit more. Black Tax means working twice as hard to make ends meet,” says Ivy.  

According to research by the Old Mutual Savings & Investment Monitor, Black Tax is one of the biggest causes of financial distress among South Africa’s middle-class population.

Young professionals, who come from poor backgrounds, often remain in the same financial position because they need to support their parents, siblings, and extended family on a single salary.

“Yes, some days it’s a bit overwhelming. But I told myself from an early age that given all the opportunities presented to me, which neither of my parents had, I’d make different choices to give all of us a better life,” says Ivy.  

She notices the pain in her parents’ eyes whenever she gives them money or helps around the house.  However, little do they know that she finds contentment in knowing that they do not have to stress about getting by. 

Different spending patterns

According to John Manyike, head of financial education at Old Mutual, the spending patterns of those without Black Tax are likely to be very different as a result of having a higher disposable income.

“On the other hand, those who experience Black Tax may buy in bulk to leverage discounts in order to stretch their rand, and they may also buy fewer luxury and brand items,” says Manyike.

Besides this, they also struggle to save for their personal future, like retirement funds, because they are too busy worrying about their family’s future.

Ivy is proud to save, even if it’s just a little, and she believes it makes her more than just a statistic contributing to the state burden.

“Being the youngest sibling I’m grateful that my parents are able to take advice from me. I sit them down every month and we plan for the month ahead. I advise them to save, even though it’s not much, and this has proven to be very effective,” says Ivy.

Today the Shirinda family is slowly moving out of their debt, including the repayment of Ivy’s student loan.  

Teach them how to fish

Manyike points out that, although it’s important to give, young professionals should be wary of spoon-feeding their families. They must make sure their family does not become too dependent on them, especially if they are capable of becoming financially independent themselves.

“For example, subsidise your siblings’ further education to improve their prospects of being employed or starting their own business. Or help your parents build back rooms they can use to earn a rental income, which could reduce the financial burden on yourself,” says Manyike.

Ivy agrees that Black Taxpayers need to spend their money wisely, but she also believes Black Tax does not always have to be about money.  

“Instead of giving fish to your family, particularly the young ones, teach them how to fish. If you always give them fish, they will never see a reason to pull up their socks,” she explains.

“You can advise your cousins and siblings to better themselves and live decent lives by making them understand the joy of being financially independent,” she adds.

Ivy advises Black Taxpayers to, “Understand the depth of their pockets and most importantly, save”. 

If you're unsure whether you should save or invest your money, have a look at this article.