Abstract
Black tax is a highly contentious social phenomenon that has an influence on the financial lives of many South Africans. The term refers to the expectation or obligation, commonly imposed on the black middle-class income earner to provide financial support to their extended relatives because the same relatives had previously taken care of them. This, in many cases causes financial strain on the person providing the support. Existing studies suggest that the more financially literate a person is, the more likely they are to plan and make better financial decisions, thereafter alleviating financial pressures experienced when they are a contributor of black tax. Better financial decisions can improve an individual’s personal financial planning outlook. This study entailed an investigation of the role of black tax in the life of an individual. It also included an exploration of the influence of limited financial planning due to deficient financial literacy and whether it has an influence on the adverse financial experiences of contributors of black tax.
The research methodology is qualitative, and the study has adopted an exploratory approach. The research instrument used, to gather data from the 12 respondents selected, and who meet the target population criteria, was semi-structured interviews. The target population criteria comprises: respondents who reside within Gauteng, South Africa; earn an income; have exposure to black tax from a contribution perspective and have financial dependents. The research method encompasses a grounded theory framework with the application of inductive reasoning and the use of thematic analysis.
The findings suggest that the extensive financial pressures commonly experienced by black tax contributors may be alleviated to a certain extent with financial literacy and thereafter financial planning. Furthermore, financial literacy and planning equips individuals with the necessary skills by enabling them to find better ways to navigate their black tax financial obligation.