ANNEXURE FOUR & FIVE: Socio-Economic Impact of HIV/AIDS on KwaZulu Natal The Management Challenge Peter Badcock-Walters & Lucinda Franklin HEARD (Health Economics & HIV/AIDS Research Division) University of Natal

ANNEXURE FOUR: Socio-Economic Impact Lucinda Franklin Research Fellow HEARD

Presentation Structure HIV in South Africa The Demographic Impact Economic Impact Social Impact Socio-Economic Determinants for KZN Summary and Conclusions

HIV in South Africa

ANC Results

Age Specific ANC Results

HIV Positive South Africans

Demographic Impact

AIDS and non-AIDS Deaths

Forecast Mortality

AIDS Orphans

Economic Impact

MORTALITY MORBIDITY Smaller population Change in age structure INDIVIDUAL FIRM/SECTOR GOVERNMENT MACRO ECONOMY HOUSEHOLD LABOUR MARKET HIV/AIDS Channels of Economic Impact

Individual level Incubation period (HIV) –5-8 years from infection until the onset of AIDS –Very little economic impact during this time AIDS phase –Period of escalating illness –Ability to work is reduced –Cost of care increases

Household level Often more than one household member is infected (sexually transmitted) 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 General population Families living with AIDS Source: Simulation based on data from Cote d’Ivoire (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 the 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 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

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 –eg increase in demand for medical goods and services Consumption in South Africa is constrained more by spending power than by consumer numbers. Who is infected will play a major role in determining the degree of impact

Sectoral Impact Impact will vary in degree across sectors –Some sectors are susceptible to infections –While 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 macro economic 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

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 –Educator 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 Long term impact?

Socio-Economic Determinants for KZN High mobility rates –Migrancy Well-developed transport infrastructure High poverty rates –Women among the poorest in province –Female-headed households poorest Rights and status of women –Rape and domestic abuse rates –Cultural barriers deny basic rights and privileges

Socio-Economic Determinants for KZN … Labour migration rates –Direct result of lack of employment opportunities in rural areas Apartheid labour system –Men obliged to leave homes/families to reside in single-sex hostels –Concentrated development efforts in cities Commercial sex work –Prospers in these conditions

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 HIV/AIDS not simply a public health problem – it demands a committed & innovative multisectoral response