Wordorigins.org

The spade in question here is a shovel, not a black person. The phrase means to speak bluntly, without euphemism or delicacy.

The phrase comes to us from Plutarch (c.46-c.120 A.D.), the Greek biographer and essayist, although not in its current form. Plutarch used the phrase to call a bowl a bowl in his Apophthegmata. The Renaissance scholar Desiderius Erasmus (1467-1536) translated Plutarch and made an error when he came to this phrase. He confused the Greek word for bowl with that for a shovel; in Greek they are very similar, coming from the same root. This was carried into English by Nicholas Udall’s 1542 translation of Erasmus’ work:

Philippus aunswered, that the Macedonians wer feloes of no fyne witte in their termes but altogether grosse, clubbyshe, and rusticall, as they whiche had not the witte to calle a spade by any other name then a spade.