The Economic &
Demographic Impact of HIV/AIDS
in South Africa
HEARDThe Health Economics & HIV/AIDS
Research Division
University of Natal, Durbanwww.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
0
5
10
15
20
25
30
35
40
94 95 96 97 98 99 '00
year
poi
nt
pre
vale
nce
rat
e (%
)
KwaZulu-Natal
Mpumalanga
Free State
North-West Province
Gauteng
South Africa
Eastern Cape
Northern Cape
Northern Province
Western Cape
Source:National HIV and Syphilis Sero-Prevalence Survey of women attending Public Antenatal Clinics in South Africa 2000.
HIV prevalence by age groupANC attendees, South Africa
0
10
20
30
40
<20 20-24 25-29 30-34 35-39 40-44 45-49
age group (years)
HIV
pre
vale
nce
rate
(%)
1996
1997
1998
1999
2000
Source:National HIV and Syphilis Sero-Prevalence Survey of women attending Public Antenatal Clinics in South Africa 2000.
HIV Positive South AfricansA projection
0
1000000
2000000
3000000
4000000
5000000
6000000
7000000
1995 2000 2005 2010
years
popu
latio
n
Source: Metropolitan Life
Demographic Impact
A model of futureAIDS and non-AIDS Deaths
0
200000
400000
600000
800000
1000000
1200000
1995 2000 2005 2010 2015
year
num
ber
of d
eath
s
Other deaths AIDS Deaths
Forecast Mortality
0.00
0.01
0.02
0.03
0.04
0.05
0.06
20-24
25-29
30-34
35-39
40-44
45-49
50-54
55-59
60-64
65-69
age group (years)
prop
ortio
n of
age
coh
ort No AIDS AIDS 1995
AIDS 2000 AIDS 2010
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
MA
CR
O-E
CO
NO
MY
HOUSEHOLD
LABOURMARKET
AIDSAIDS
HIVHIV
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
Impact of HIV/AIDS in urban households, Côte d’Ivoire
General populationGeneral population Families living with AIDSFamilies living with AIDS
Source: Source: Simulation-based on data from Bechu, Delcroix and Guillaume, 1997Simulation-based on data from Bechu, Delcroix and Guillaume, 1997
Monthly income per capitaMonthly income per capita
Monthly consumptionper capitaMonthly consumptionper capita
00
5 0005 000
10 00010 000
15 00015 000
20 00020 000
25 00025 000
– 5 000– 5 000
30 000 Francs CFA30 000 Francs CFA
Savings/DisavingsSavings/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/AIDSin 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 6or 7
Year 7 or 8
Different costs for companies
Medical care4%
Turnover*22% Absenteeism
34%
Productivity loss40%
Absenteeism14%
Productivity loss7%
Retirement/disability
62%
Turnover*17%
Company A Company B
Artisans, Males 35-49
*Recruitment, training, vacancy
Center for International HealthBoston University School of Public Health
Different costs for companies Company A
Defined benefit pensionfund
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 BDefined 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
2010 2015 2010 2015ING Barings* -0.3 -0.3 -2.0 -2.8Channing & Lewis -1.6 - -17 -ABSA* -0.7 -0.8 -5.9 -9.6Abt Assoc.* -0.4 to -0.2 - -5.4 to -2.1 -
% point difference in annual GDP growth rates
% difference in real GDP level
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