Two Paths To Wealth

SOME progress has been recorded, but the wealth gap between blacks and whites in this country is a stark reality we can no longer ignore.

Why blacks in this country are so poor is the perennial question. Is it because they are lazy; they have large extended families; they lack a culture of saving and frugality, or has it to do with the legacy of colonialism and discriminatory practices?

Like everywhere in the world, blacks are caught up in what sociologists call the “double burden” of poverty. They not only are faced by their own individual poverty, but also the disadvantages around them.

Take for example Steven and Kare, who both grew up in the beautiful town of Otjiwarongo. Life would also have it that both belong to the born-free generation, born after Namibia’s independence.

Both, to a varying degree, are smart people, and come from backgrounds with strong family values that instilled in them the importance of education, strict morals and the ethic of hard work.

Beyond those commonalities, their lives diverge. Steven, who is white, lived in a posh neighbourhood where many of his other neighbours were educated, well-off and worked in the banks, schools, hospitals and other key industries in the private sector.

Very talented, Steven passed his grade 12 with flying colours. At the university, Steven enrolled for a bachelor of arts in economics, where he graduated with an A-average.

For his first job, Steven was employed by a major private bank in Windhoek immediately after his graduation. After some years of working, he is worth N$30 million in assets and N$20 million in property and bank balance. He also holds shares worth thousands in some major retailers in the country.

On his end, Kare, who is black, comes from a neighbourhood where many other families are poor, struggling and working- class. In comparison with Steven, Kare is not so poor, but also not so rich. His parents are the first generation from his community to get an education. Like Steven, Kare managed to complete his grade 12 and ended up at the university, where he enrolled for a bachelor of arts in public administration.

After university, Kare also made it into the world of work, but it was only a year after graduation that he was able to land a job in government. In comparison to Steven, Kare is worth only N$1 million in property and bank balance, and mostly survives from payday to payday.

This story is simplified and fictitious. However, the difference between Steven and Kare’s wealth gap is what economists call a “generational wealth gap”.

In a chain of succession from many generations up to his parents, Steven’s parents were able to leave him the proceeds of the generational wealth they inherited. And in return, when Steven dies one day, he will be able to leave those proceeds to his children, and so will the wealth chain continue from generation to generation.

Recall for a moment that after graduating from university, Steven immediately got a job. Perhaps he was lucky, but one cannot also rule out the benefits from his social network of growing up in a thriving neighbourhood, where almost everybody was educated, employed or in business.

Economists call such connections social-capital resources or networks of people which can be economically valuable to an individual. He was able to tap for such social capital in the form of information, advice, mentorship and access to financial means.

Wealth is a social creation. What is true of Steven is that he did not start from scratch because his parents and forefathers were able to buy and own property; start their own businesses; have shares in business; and built strong social capital. Perhaps the advantage of the colonial preferential treatment also helped.

Kare, on the other hand, does not have such a social and economic jump because his parents did not have generational wealth. This means no property, no equity, no shares, and limited access to loans. Instead of inheriting wealth and social capital, he has to start from scratch. Following the same pattern, his children would have to start from scratch too.

Perhaps there is a random effect accounting for Steven and Kare’s wealth outcomes here: luck; personal motivation; hard work; their family size; frugality; their study majors, and the culture of spending, which might have influenced their different wealth outcomes in life.

But have you wondered why blacks are denied mortgages and home improvement loans at higher rates than their white counterparts in this country? Lack of collateral –– property, home ownership and shares are some of the main reasons.

If we want to address the wealth gap, we need to focus on strategies that increase home ownership, increase shareholding and equity, and increase business ownership.

• Ndumba J Kamwanyah is deputy director at the University of Namibia’s Centre for Professional Development and Teaching and Learning Improvement. He writes in his personal capacity.

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