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
 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
 HIV/AIDS
in
South Africa
 Provincial HIV prevalence:
Antenatal clinic attendees
KwaZulu-Natal
40
point prevalence rate (%)

Mpumalanga
35
Free State
30
North-West Province
25
Gauteng
20
South Africa
15
Eastern Cape
10
Northern Cape
5
0 Northern Province

94 95 96 97 98 99 '00 Western Cape

year

Source:National HIV and Syphilis Sero-Prevalence Survey of women attending Public

Antenatal Clinics in South Africa 2000.
 HIV prevalence by age group
ANC attendees, South Africa

40
HIV prevalence rate (%)

30 1996
20 1997
10 1998

0 1999
<20 20-24 25-29 30-34 35-39 40-44 45-49 2000

age group (years )

Source:National HIV and Syphilis Sero-Prevalence Survey of women

attending Public Antenatal Clinics in South Africa 2000.
 HIV Positive South Africans
A projection
7000000

6000000

5000000
population

4000000

3000000

2000000

1000000

0
1995 2000 2005 2010

years

Source: Metropolitan Life

Demographic Impact
 A model of future
AIDS and non-AIDS Deaths
1200000
Other deaths AIDS Deaths
1000000
number of deaths

800000

600000

400000

200000

0
1995 2000 2005 2010 2015

year
 Forecast Mortality
0.06
No AIDS AIDS 1995
proportion of age cohort

0.05 AIDS 2000 AIDS 2010

0.04

0.03

0.02

0.01

0.00
20

25

30

35

40

45

50

55

60

65
-2

-2

-3

-4

-4

-5

-6
-3

-5

-6
4

9
9

9
age group (years)

Source: Metropolitan Life

 Projected AIDS Orphans

Source: Metropolitan Life

Economic Impact
 Pathways to Economic Impact
HIV
INDIVIDUAL

MACRO-ECONOMY
Smaller
population
HOUSEHOLD

MORTALITY LABOUR
MARKET
Change in
AIDS age structure
FIRM/SECTOR
MORBIDITY
GOVERNMENT
Productivity
 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
 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
 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
Impact of HIV/AIDS in urban households,
Côte d’Ivoire
General population
Families living with AIDS
30 000 Francs CFA

25 000
Monthly
income
20 000
per capita
15 000
Monthly
10 000 consumption
per capita
5 000
Savings/Disavi
0 ngs

– 5 000

Source: Simulation-based on data from Bechu, Delcroix and Guillaume, 1997

 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
 Company costs
Timeline Progression of HIV/AIDS Economic Impact on the Company
in the Workforce

Year 0 Employee becomes infected No costs to company at this stage

Morbidity begins Morbidity-related costs are incurred

Year 1-5 (e.g. absenteeism, individual & workforce
productivity, management resources, medical
care & insurance)

Employee leaves workforce Termination-related costs are incurred

Year 6 (resigns or dies) (e.g. payouts from pension or provident fund,
or 7 funeral expenses, loss of morale, experience, &
work-unit cohesion)

Company hires replacement Turnover costs are incurred

Year 7 employee (e.g. recruiting, training, reduced productivity)
or 8

Negative effect on production costs, production process,

demand for capital/labour, output prices and competitiveness
 Different costs for companies
Artisans, Males 35-49

Company A Company B
Absenteeism
14% Turnover*
Turnover* 22%
17% Absenteeism
Productivity
34%
loss
7%

Medical care
4%

Productivity
Retirement/ *Recruitment, training, vacancy loss
disability 40%
62%

Center for International Health

Boston University School of Public Health
 Different costs for companies
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)
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)
 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
 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
 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
 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

% point difference in % difference in real GDP

annual GDP growth rates level

2010 2015 2010 2015

ING Barings* -0.3 -0.3 -2.0 -2.8
Channing & Lewis -1.6 - -17 -
ABSA* -0.7 -0.8 -5.9 -9.6
Abt Assoc.* -0.4 to -0.2 - -5.4 to -2.1 -
Social Impacts
 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
 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
 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
HIV/AIDS & Democratic
Governance
 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
 Impact of Democratic
Governance on HIV/AIDS

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