The Economic Demographic Impact of HIV AIDS in South Africa

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 40 point prevalence rate (%) KwaZulu-Natal Mpumalanga Free State North-West Province Gauteng South Africa Eastern Cape Northern Cape Northern Province 35 30 25 20 15 10 5 0 94 95 96 97 year 98 99 '00 Western Cape 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 HIV prevalence rate (%) 40 30 20 10 0 <20 20-24 25-29 30-34 35-39 40-44 45-49 age group (years) 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 Africans A projection 7000000 6000000 population 5000000 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 number of deaths 1000000 800000 600000 400000 200000 0 1995 2000 2005 2010 2015 year Forecast Mortality 0.06 proportion of age cohort 0.05 0.04 0.03 0.02 0.01 0.00 20 -2 4 25 -2 9 30 -3 4 35 -3 9 40 -4 4 No AIDS AIDS 2000 AIDS 1995 AIDS 2010 age group (years) Source: Metropolitan Life 45 -4 9 50 -5 4 55 -5 9 60 -6 4 65 -6 9 Projected AIDS Orphans 2000000 AIDS Orphans number of orphans 1500000 1000000 500000 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 years Source: Metropolitan Life 2010 Economic Impact Pathways to Economic Impact HIV INDIVIDUAL MACRO-ECONOMY Smaller population HOUSEHOLD LABOUR MARKET FIRM/SECTOR MORTALITY AIDS Change in age structure MORBIDITY Productivity GOVERNMENT 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 30 000 Francs CFA 25 000 20 000 15 000 10 000 5 000 0 – 5 000 Families living with AIDS Monthly income per capita Monthly consumption per capita Savings/Disavings 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 in the Workforce Economic Impact on the Company Year 0 Employee becomes infected Morbidity begins 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) Year 1-5 Year 6 or 7 Employee leaves workforce (resigns or dies) Year 7 or 8 Company hires replacement employee 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 Turnover* 17% Absenteeism 14% Company B Turnover* 22% Absenteeism 34% Productivity loss 7% Medical care 4% Retirement/ disability 62% *Recruitment, training, vacancy Productivity loss 40% Center for International Health Boston University School of Public Health Different costs for companies 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 A 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 ING Barings* Channing & Lewis ABSA* Abt Assoc.* -0.3 -1.6 -0.7 -0.4 to -0.2 2015 -0.3 -0.8 2010 -2.0 -17 -5.9 -5.4 to -2.1 2015 -2.8 -9.6 - 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