A structural analysis of Black Tax impact on business performance among small medium micro enterprises in Limpopo Province

Abstract

Black tax has been widely debated across different media and societal platforms and this has led to it being viewed as a burden that is crippling the aspirations of the 21st century generation. Africans are collectivist people who are grounded on the premise of caring for and assisting other members who are in need either at a family or societal perspective. However, in the 21st century that moral obligation is slowly losing its essence due to the increased level of literacy where individuals prefer to live in a vacuum and give a blind eye to the reality of the needs of others. This resulted in the emergence of a term black tax which addresses the support that individuals extend either to their immediate or extended families. Some studies have focused on its effect on employed individuals and in-inclusive of entrepreneurship. Hence there is a need to test the relationship if any that exists between black tax and entrepreneurship. It is against this background that this study seeks to investigate the effect of black tax on entrepreneurship within the South African context. The study was grounded on the Society Piety theory and Kinscripts framework that posit that individuals are morally obligated to their parents and should be aligned with the societal ideologies, values and norms. This study was conducted using mixed methods and guided by the pragmatism paradigm and ethnography research design. On the qualitative side, the data was collected from 15 entrepreneurs using face to face and online interviews guided by a structured interview guide. The entrepreneurs were purposively sampled. The collected data was transcribed utilizing Microsoft Word and analysed using thematic framework analysis aided by ATLAS. ti. On the quantitative side the descriptive research design guided the study with data collected from 150 entrepreneurs who were purposively sampled. The Likert scale questionnaire was used to collect data. The collected data was coded using Microsoft Excel and analysis using descriptive and inferential statistics aided by SPSS. The findings showed that black tax can be defined using the components that are uncodified law, perpetual obligation, background dependent, culture and values embedded, monetary assistance, non-monetary assistance, giving back, pay back and family entitlement. The perceptions of black were found to be act of altruism, family/siblings’ upliftment source, piety towards parents/guardians, futuristic support investment, positivity instilling source, entrepreneurship development stimulus, proper connotation, negative connotation, incessant exploitation, and family entitlement for support. The black tax impact on business performance manifest as boost business image, strong network development, financial constraints, profit reduction, inventory depletion, stifled business growth, stimulate borrowing and business closure/failure. The findings also showed that black tax experiences are cuts across all ethnic groups, heterogeneous experience across races, more effect amongst blacks, homogeneous experiences across genders and more effect amongst men. The black tax model was also developed that is imperative towards business sustainability. This study recommends that there must be a black tax target set by entrepreneurs towards evaluating and monitoring constantly the black tax payment to establish a shift from constructive to destructive black tax or vice versa. The study also recommends a paradigm shift on how entrepreneurs are viewed thus as community problem solvers and risk takers rather than as ATMs. The study also recommends that black tax be considered for tax incentives purposes. The study also recommends that an all inclusive term such as family tax or responsibility tax be considered in place of black tax.