Real Estate Investor Magazine South Africa July/August 2019 | Page 60

WEALTH
Black Tax:
What to look out for
How to manage the financial distress of Black Tax
W
ealth creation is elusive when one earner sup-
FINDINGS FROM THE 2018 ROUND OF OM-
ports many – this is the current dilemma faced
SIM NOTED THE FOLLOWING:
by many young black South Africans when it
72% of working metro South Africans are
comes to Black Tax. Black Tax is a term coined by many to
currently supporting, or foresee that they will
define financial support to extended family within black
have to support older family members in the
communities.
future (70% in 2017)
Head of Financial Education at Old Mutual Limited,
John Manyike says that Black Tax can cause problems.
The equivalent numbers for Black respondents
“Whilst the efforts made through Black Tax benefit
was even higher: 83% foresee that they will have
individuals and communities, these very same efforts can
to support older family members in the future
also inadvertently create a cycle of financial adversities
(79% in 2017).
for families.”
The conversations around Black Tax should be
For Black respondents, support for parents was
centered around shattering the shackles of poverty
the most prevalent, followed by siblings. This is
within previously disadvantaged families. Black Tax is
apart from respondents supporting their own
often linked to complicated emotions and should be
children.
approached delicately.
“The issue of Black Tax is a complex one characterised
Nearly 1 in 5 Black working metro South Africans
by a balancing act between the responsibility felt to
regularly support at least one sibling
immediate and extended families and the desire to attain
financial freedom,” said Manyike.
Manyike provides a simple answer
While many people contribute to
to what we can do to combat the
their families in this way, in some “In instances where an individual financial distress caused by Black Tax,
instances, it can cripple the future is regularly contributing towards with the core being a focus on proper
financial aspirations of an individual, family needs, it must be factored financial planning. “In instances where
especially in the case of the youth. into the person’s financial plan. an individual is regularly contributing
Young professionals who come
This is where sound financial towards family needs, it must be factored
from previously disadvantaged
planning
becomes critical. With into the person’s financial plan. This is
backgrounds often remain in the
where sound financial planning becomes
same financial position for an a good financial plan, the person critical. With a good financial plan, the
extended period because they need would be able to still attain their person would be able to still attain their
to support their parents, siblings lifetime financial goals,” advises lifetime financial goals,” advises Manyike.
and extended family on a single
Manyike.
He adds that monthly budgeting is an
salary. This is further compounded
important aspect to decrease levels of
by the fact that South Africa’s
financial distress.“Knowing your financial status will help
economy is currently severely strained – compounded
so many youths stifle the frustration of having to pay for
by rising fuel process and increasing living costs.
things they don’t feel responsible for, which often times
Black Tax stems from the origins of the African family,
lead to tensions in families. These are the main issues
where families originally shared a common wealth.
raised by clients in our research.”
Families co-existed and their wealth was distributed
It becomes a burden when individuals don’t have the
amongst themselves. This was disrupted by colonisation
proper financial literacy and acumen to differentiate
and apartheid, which separated and pulled families
between what they can and can’t afford.
apart. Essentially, it left families operating in miniature
“One needs to understand and maintain their own
silos. This meant that the large wealth reserves Africans
financial health and limits before they can offer up
initially had to distribute, were now significantly
a helping hand,” says Manyike. “Once you know your
minimised to individual salaries of working family
financial limits, it makes it much easier to establish how
members. It has made it more expensive to survive,
much you are able to contributeon a monthly basis when
spreading the available wealth considerably thinner.
it comes to assisting family members,” said Manyike
According to research conducted through the Old
Mutual Savings & Investment Monitor (OMSIM), Black Tax
RESOURCES Old Mutual Limited South Africa
is one of the biggest causes of financial distress among
South Africa’s middle-class.
“
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JULY/AUGUST 2019 SA Real Estate Investor Magazine