The Economic & Demographic Impact of HIV/AIDS in South Africa HEARD The Health Economics & HIV/AIDS Research Division University of Natal, Durban

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 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 Source:National HIV and Syphilis Sero-Prevalence Survey of women attending Public Antenatal Clinics in South Africa 2000.

HIV Positive South Africans A projection Source: Metropolitan Life

Demographic Impact

A model of future AIDS and non-AIDS Deaths

Forecast Mortality Source: Metropolitan Life

Projected AIDS Orphans Source: Metropolitan Life

Economic Impact

Pathways to Economic Impact MORTALITY MORBIDITY Smaller population Change in age structure INDIVIDUAL FIRM/SECTOR GOVERNMENT MACRO-ECONOMY HOUSEHOLD LABOUR MARKET AIDSHIV 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 Source: Simulation-based on data from Bechu, Delcroix and Guillaume, 1997 Monthly income per capita Monthly income per capita Monthly consumption per capita Monthly consumption per capita – Francs CFA Savings/Disavings

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 Negative effect on production costs, production process, demand for capital/labour, output prices and competitiveness Progression of HIV/AIDS in the Workforce Economic Impact on the Company Morbidity begins Employee becomes infected Employee leaves workforce (resigns or dies) Company hires replacement employee No costs to company at this stage Morbidity-related costs are incurred (e.g. absenteeism, individual & workforce productivity, management resources, medical care & insurance) Termination-related costs are incurred (e.g. payouts from pension or provident fund, funeral expenses, loss of morale, experience, & work-unit cohesion) Turnover costs are incurred (e.g. recruiting, training, reduced productivity) Timeline Year 0 Year 1-5 Year 6 or 7 Year 7 or 8

Different costs for companies Company A Company B Artisans, Males *Recruitment, training, vacancy 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

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