South Africa has produced a growing cohort of Black professionals and business owners who have broken into the upper reaches of the income distribution. The next challenge is to turn that achievement into lasting wealth, and ensure that their children inherit an economic head-start rather than having to build everything from scratch.
Recently, I had a conversation with a friend who is a senior credit evaluation manager at one of South Africa’s major banks. He had recently married and was beginning to think about having children. Our conversation turned to something I believe deserves considerably more attention among Black professionals and business owners: how do you ensure that your children enter adulthood with assets, rather than simply the expectation that they will obtain a good education, find employment and build wealth for themselves?
My advice was fairly unconventional. Open a tax-free savings account (TFSA) in the child’s name from birth and begin contributing to it. When choosing a school, seriously consider a good, well-resourced, fee-paying public school, including one of the better former Model C schools, rather than automatically assuming that an expensive private school is the best option. Invest the difference in fees into a portfolio for the child, including globally diversified investments.
By the time that child finishes university or professional training, the ambition should be for them to have a substantial tax-free investment portfolio, a separate pool of capital to help with the transition into adulthood, and an offshore investment portfolio that provides international financial flexibility.
In other words, rather than simply passing down an expectation of upward mobility, give the next generation an actual balance sheet.
This speaks to a much bigger question about South Africa’s emerging Black professional and business-owning class: why has the growth in Black incomes not translated into a comparable expansion of intergenerational Black wealth?
The difference between earning wealth and owning it
The December 2025 working paper by Léo Czajka and Amory Gethin, Racial Inequality and Redistribution in Post-Apartheid South Africa, provides an important starting point.
Their research examines income distribution between 1993 and 2019, combining household surveys, tax data, national accounts and government expenditure.
One of its most consequential findings is the emergence of a substantial Black upper-income class. By 2019, the richest 10% of Black South Africans received 30.5% of national pretax income, despite representing approximately 8.2% of the country’s population.
The income growth of this group was exceptional. Between 1993 and 2019, Black top-decile incomes grew by 144%, compared with 42% for the remaining 90%. The growth of the Black top decile also explains approximately 46% of the reduction in the White-to-Black average factor-income ratio over this period.
This is a significant economic transformation. Black South Africans have made considerable advances into the upper reaches of the income distribution.
However, income and wealth are different things. Income is a flow; wealth is a stock of accumulated assets.
The Momentum-Unisa Household Wealth Index for Q4 2023 illustrates the distinction. African Black households accounted for 82.1% of households but held 57.3% of aggregate household wealth. White households, by contrast, represented 8.6% of households and held 32.2% of household wealth.
Momentum also found that the wealthiest 10% of households owned approximately 75.8% of household wealth, while the top 10% of income-earning households possessed 47.3%.
The two distributions tell us something important: entering the upper reaches of the income distribution is not the same as entering the upper reaches of the wealth distribution.
This is the distinction that should concern Black professionals and business owners. We have made considerable progress in accessing high incomes, but how much of that income is being converted into diversified, appreciating assets?
Starting from a different financial position
Part of the answer lies in the very different financial circumstances in which people begin their working lives.
Rebecca Simson and Mina Mahmoudzadeh’s 2024 study, Inherited Wealth in Post-Apartheid South Africa: New Perspectives from Probate Records, provides particularly striking evidence.
Using probate records, the researchers estimate that 45% of White South African adults possess inheritable wealth of at least R250,000, compared with just 3% of Black adults. The corresponding figures are 9% for Coloured and 23% for Indian South Africans.
These differences are a reminder of how much wealth accumulation depends on what previous generations have already built.
Consider two professionals who earn the same salary. One inherits a property, receives assistance with a home deposit and has parents who can finance tertiary education. The other has financed their own education, must acquire their first property through a mortgage and may still be supporting family members.
Their salaries might be identical, but their capacity to accumulate wealth is not.
The first individual can use current income to expand an existing asset base. The second must use much of that income to establish one.
This is the intergenerational capital deficit that first-generation Black professionals are often required to overcome. It is not simply a question of earning more money. It is the opportunity cost of having to establish financial foundations that other households already possess.
The consequences extend beyond the first property purchase. A family with existing assets can provide collateral, finance business opportunities, cover emergencies and give younger members time to make longer-term investment decisions. A family without those assets depends much more heavily on current employment income.
The different costs of building wealth through salary
There is also a tax dimension worth examining.
South Africa’s personal income-tax system is progressive, but different forms of economic return receive different tax treatment.
For the 2026/27 tax year, the highest marginal personal income-tax rate is 45%. The maximum effective capital gains tax rate for individuals is 18%, while dividends tax is generally 20%.
These rates apply to different tax bases, but the economic distinction is clear. Someone whose wealth is predominantly generated through employment income has a different accumulation experience from someone who already owns appreciating businesses, shares and investment properties.
A professional earning R2 million through salary must accumulate most of their investible capital from after-tax income. An established asset owner can experience substantial increases in net worth through appreciation without receiving equivalent amounts of taxable annual cash income.
The distinction is not simply about tax rates. It is about ownership.
Existing asset ownership creates access to different ways of generating, retaining and compounding economic returns. The historical racial distribution of ownership means that these opportunities have not been equally available.
Czajka and Gethin’s research illustrates the importance of capital income at the top of the distribution. More than half of factor income among the national top 1% comes from capital.
For Black professionals whose economic advancement is primarily salary-based, the challenge is to turn employment income into ownership of capital before too much of their working life has passed.
The additional responsibility of supporting family
There is another consideration that financial planning frequently overlooks: private family redistribution.
Czajka and Gethin estimate that in 2019 the Black top income decile was a net contributor to the public tax-and-transfer system. Its net contribution amounted to approximately 6.5% of national net income. The bottom 90% of Black South Africans, by contrast, received net transfers equivalent to 19% of national income.
Black high earners have therefore become an important part of the country’s taxpaying base.
But their financial responsibilities often extend beyond the state.
A June 2026 study by Emma Whitelaw, Nicola Branson and Murray Leibbrandt, Studying to Support? Exploring Remittance Responsibilities Among Black South African Graduates, provides important evidence of private family support.
Using nationally representative data from the 2017/18 National Income Dynamics Study, the researchers find that Black graduates are more likely to remit money to family members than other Black respondents, even after accounting for income, employment and household characteristics.
Among those who remitted, graduates transferred an average of approximately R1,984 per month, compared with R1,420 among other remitters. Graduates were also more likely to support parents and a slightly greater number of people.
This creates a combination of public fiscal contributions and private family obligations.
A professional may pay substantial income taxes, contribute to public services through other taxes, and simultaneously support parents, finance a sibling’s education and contribute to relatives’ healthcare.
The money transferred privately is no longer available for a property deposit, an equity portfolio or retirement savings. It is a redistribution of resources within the extended family network.
Family solidarity is important, and these contributions can be transformative for recipients. But they should be recognised as a significant part of household financial planning. Black professionals need to plan for family support without sacrificing the accumulation of assets that will eventually give their own children a financial head start.
We need to think differently about the next generation
This brings me back to my conversation with my friend.
I believe Black professionals and business owners should begin treating their children’s financial position as a separate intergenerational project.
The objective should be to ensure that a child does not have to spend their first decade of employment doing what their parents had to do: establish an emergency fund, save for a deposit, pay off education debt, acquire basic financial investments and build a retirement portfolio simultaneously.
There are three practical ways to start.
TFSA from birth
South Africa’s TFSA framework offers an excellent mechanism for long-term wealth accumulation. From 1 March 2026, the annual contribution limit is R46,000, with a lifetime contribution limit of R500,000.
Parents can contribute to a TFSA on behalf of a minor child, using the child’s own annual and lifetime contribution limits. Investment growth, interest and dividends within the account are exempt from income tax, dividends tax and capital gains tax.
The advantage is time. A TFSA opened at birth has the potential to compound for decades.
Parents should resist treating it as a convenient account to empty when the child turns 18. Withdrawals do not restore contribution room, so the TFSA should ideally remain a permanent component of the child’s balance sheet.
Investment portfolio for the child’s transition into adulthood.
This is where the school-fee decision becomes important.
Statistics South Africa’s 2025 Education Series: Household and Government Expenditure on Education highlights the substantial difference between fee-paying public schools and elite private institutions. Some of the country’s most expensive Quintile 5 public schools charged approximately R74,000–R83,000 annually in 2025, while elite private day schools charged more than R200,000 and some private boarding schools approached R400,000.
A good education is essential, but an expensive private-school label is not automatically a guarantee of a better educational investment.
A well-resourced former Model C school with excellent teaching, safety, extracurricular opportunities and a suitable environment can provide an excellent education. Where it is the right choice for the child, the difference in fees should not simply disappear into additional household consumption.
It should be invested.
Even a hypothetical R3,000 monthly investment, sustained from birth to age 18, represents R648,000 in contributions before investment returns.
That capital could become meaningful support for postgraduate education, a first-home deposit, entrepreneurial activity or the transition into employment.
The point is to give the child options that their parents may not have had.
Early global investment exposure
A child’s financial future should not be confined entirely to the South African economy.
A properly structured offshore investment portfolio, with exposure to international markets and major currencies, can provide diversification and international flexibility.
This need not mean holding a large idle dollar balance. It means investing in globally diversified assets, with an appropriate foreign-currency allocation, while complying with South African tax and exchange-control requirements.
By the time the child reaches adulthood, the aim should be to provide both domestic financial foundations and international optionality.
The combination is powerful: a TFSA that can compound throughout adulthood, a separate investment portfolio that can finance important early-life decisions, and global assets that provide access to opportunities beyond South Africa.
A different proposition for financial services firms
There is an opportunity here for South African banks, wealth managers, asset managers and financial advisers.
Financial planning for affluent Black households should not end with retirement annuities, life insurance, home loans and investment portfolios for the principal income earners.
It should incorporate intergenerational wealth creation.
Advisers should be asking clients about the assets they want to pass on, their children’s investment accounts, their family-support obligations and the financial position they hope their children will occupy at 25 or 30.
Banks and investment firms should make it easier for parents to establish low-cost, diversified investment portfolios for children, including access to global investments.
There is also an opportunity to move beyond selling individual financial products towards providing integrated family wealth planning. That means combining investments, estate planning, tax-efficient structures, retirement provision and financial education across generations.
For Black households that are building wealth for the first time, this is particularly important. They need advice that addresses not only how to earn and invest money, but how to preserve it and transfer it.
A household can afford an expensive car, private schooling and a large mortgage while having relatively little discretionary capital or diversified investments. Financial planning should account for both present living standards and the assets being built for the future.
Ambition must extend beyond first generation
South Africa’s Black professional and business-owning class represents a significant economic achievement. Czajka and Gethin’s research demonstrates just how far the income distribution has changed, even as the broader racial wealth divide remains substantial.
The next challenge is to make this progress intergenerational.
This does not mean that every Black professional must become wealthy, that private family support should disappear or that every child must attend a particular category of school.
It means recognising that economic advancement involves more than earning a good salary. It requires converting income into assets, preserving capital and transferring financial opportunity between generations.
For a generation that has often had to build its financial foundations from scratch, perhaps the most consequential thing it can do is ensure that its children do not have to.
The ultimate measure of Black economic advancement should not only be how many Black South Africans enter the top 10% of the income distribution. It should also be how many of their children enter adulthood already owning a meaningful share of the country’s accumulated wealth.
[Image: by jm_video]
The views of the writer are not necessarily the views of the Daily Friend or the IRR.
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