The Economic

1
The Economic Demographic Impact of HIV/AIDS
in South Africa

• HEARD
• The Health Economics HIV/AIDS Research Division
• University of Natal, Durban
• www.und.ac.za/und/heard

2
Presentation Structure

• HIV/AIDS in South Africa
• The Demographic Impact
• Economic Impact
• Social Impact
• The Impact on Democratic Governance
• Summary and Conclusions
• An action agenda

3
HIV/AIDS in South Africa
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Provincial HIV prevalenceAntenatal clinic
attendees
SourceNational HIV and Syphilis Sero-Prevalence
Survey of women attending Public Antenatal
Clinics in South Africa 2000.
5
HIV prevalence by age groupANC attendees, South
Africa
SourceNational HIV and Syphilis Sero-Prevalence
Survey of women attending Public Antenatal
Clinics in South Africa 2000.
6
HIV Positive South AfricansA projection
Source Metropolitan Life
7
Demographic Impact
8
A model of futureAIDS and non-AIDS Deaths
9
Forecast Mortality
Source Metropolitan Life
10
Projected AIDS Orphans
Source Metropolitan Life
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Economic Impact
12
Pathways to Economic Impact
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Individual level

• Incubation period
• 5-8 years from infection until the onset of AIDS
• very little economic impact during this time
• AIDS
• Period of escalating illness
• Ability to work is reduced
• The cost of care increases

14
Household level

• Due to the sexual nature of transmission often
  more than one household member is infected.
• Infections are concentrated among the primary
  carers and earners
• Double impact of reduced income and increased
  costs of care

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Household level cont..

• Less money available for other consumption
• Increased need for care diverts time and effort
  from other tasks
• children, often girls, may be removed from school
  to provide care or generate income
• Death(s), often multiple, lead to funeral costs
  which are usually large
• Disaving may result

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Impact of HIV/AIDS in urban households, Côte
dIvoire
General population
Families living with AIDS
30 000 Francs CFA
25 000
Monthly income per capita
20 000
15 000
Monthly consumption per capita
10 000
5 000
Savings/Disavings
0
5 000
Source Simulation-based on data from Bechu,
Delcroix and Guillaume, 1997
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Labour Market

• AIDS impacts on sexually / economically active
  population
• AIDS related illness leads to
• reduced productivity due to absenteeism, high
  turnover etc
• AIDS related death leads to
• change in labour force and labour participation
• change in age structure of labour force
• change in available skills and experience

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Company costs
Progression of HIV/AIDS in the Workforce
Economic Impact on the Company
Timeline
Year 0
Employee becomes infected
No costs to company at this stage
Morbidity begins
Morbidity-related costs are incurred (e.g.
absenteeism, individual workforce productivity,
management resources, medical care insurance)
Year 1-5
Employee leaves workforce (resigns or dies)
Termination-related costs are incurred (e.g.
payouts from pension or provident fund, funeral
expenses, loss of morale, experience, work-unit
cohesion)
Year 6 or 7
Company hires replacement employee
Turnover costs are incurred (e.g. recruiting,
training, reduced productivity)
Year 7 or 8
Negative effect on production costs, production
process, demand for capital/labour, output
prices and competitiveness
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Different costs for companies
Artisans, Males 35-49
Company A
Company B
Recruitment, training, vacancy
Center for International Health Boston University
School of Public Health
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Different costs for companies
Company B Defined contribution provident
fund Disability/death benefit premiums capped
benefits will fall Most employees use company
clinics Modest investment in recruitment and
training More labor-intensive productivity of
labor and salaries are lower More reliance on
contract labor for unskilled tasks (contract
workers receive fewer benefits than permanent
staff)
Company A Defined benefit pension fund No cap
on disability/death benefit premiums benefits
are stable Medical aid coverage for all
employees Large investment in recruitment and
training More capital-intensive productivity of
labor and salaries are higher Unskilled tasks
done by permanent employees, not contract workers
(employees receive full benefits)
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Consumer Markets

• The absolute number of consumers will be reduced
  from what it would have been
• The age structure of the market will change
• The structure of demand will also change
• e.g. increase in demand for medical goods and
  services
• Consumption in South Africa is, however,
  constrained more by spending power than consumer
  numbers. Who is infected will play a major role
  in determining the degree of impact

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Sectoral Impact

• Impact will vary in degrees across sectors
• Some sectors are susceptible to infections
• Others are vulnerable to the impact
• Those sectors that are both vulnerable and
  susceptible will be the most seriously hit
• The impact on critical sectors in the economy
  will play a major role in determining the
  macroeconomic impact

23
Government Finance

• Increased demand on government services
• Health
• Welfare
• Poverty reduction
• Although demand will increase, the level of
  spending on services will be determined by policy
  decisions

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Macroeconomic impact

• Impact mostly due to
• reduced productivity and increased costs for
  companies
• reduction in household income due to increased
  AIDS-related expenditure
• increase in government budget deficit due to
  increased health spending

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Social Impacts
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Systems

• Health care
• Increased demand
• Decreased ability to offer services as a result
  of staff loss
• Crowding out
• Similar impact on Welfare services
• Education
• Reduction in demand
• Greater reduction in ability to offer services

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Socialisation

• Psychological impact on children
• Parental illness and death
• Educators illness and death
• Increased death in the community
• Care of orphans
• The need to care for orphans will increase
• Ability of traditional arrangements to cope will
  be eroded
• Most important long term impact

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HIV and Poverty

• Poverty can lead to behaviour which results in
  increased risk of infection
• HIV increases poverty
• However, the relationship is not a simple one, as
  increased resources may increase access to sex

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HIV/AIDS Democratic Governance
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Impact of HIV/AIDS on Democratic Governance

• Rule of Law Human Rights affected
• Decreased citizen involvement with DG
• Decreased citizen compliance
• Decreased citizen support for DG
• Credible competitive political processes
  affected
• Development of civil society hindered

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Impact of Democratic Governance on HIV/AIDS

• Government legitimacy/effectiveness
• Public compliance
• Public awareness
• Social-cultural factors arising from a democratic
  environment

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Summary and Conclusions
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Conclusions

• HIV has already reached very high levels in South
  Africa and is set to rise for a few more years
• The resultant increase in death will change the
  structure of the population
• Households and individuals will feel the greatest
  economic impact
• The impact on companies and sectors will vary
• The macroeconomic impact will be felt in the long
  term

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Conclusions..

• Health care, welfare and education systems will
  be adversely affected
• HIV/AIDS is the single greatest threat to
  development in South Africa
• Our greatest concern is the impact that HIV will
  have on our children
• Innovation in, and commitment to fighting this
  problem are required to reduce the impact on this
  and future generations

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An Action Agenda

• There are no
• Simple solutions
• Short term solutions
• Technical/medical solutions
• Imposed solutions
• Money is not the answer
• Drugs are only part of the answer
• A multisectoral response is needed