Economic Impact Of HIV AIDS In South Africa

October 12, 2017 Medical

South Africa faces one of the universe ‘s most terrible HIV/AIDS pandemics harmonizing to the Bureau for Economic Research ( BER, 2007:11 ) . The disease was ab initio merely regarded as a serious wellness crisis, but it is now clear that the pandemic besides holds economic effects for South Africa and besides have far making socio-economic effects.

It is hard to exaggerate the agony that HIV has caused in South Africa, both socially and economically. With statistics demoing that one in five grownups are infected, its non surprising to observe that a recent study found South Africans spent more clip at funerals than they did holding their hair cut, shopping or even holding barbeques ( Anonymous ) . In any economic system, human capital is basically the most of import resource for using other factors of production efficaciously.

Therefore, a pandemic of this nature is viewed as a direct menace to the productiveness and economic efficiency of the state. This shall be portrayed utilizing a model that describes how the disease affects the single economic province, and how these effects ripple outwards to concerns and finally the macro-economy.

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The model will therefore take into history the Impact on the Individual and on Households, the Impact on the Labour Market, the Impact on Firms and General Industry, and the Impact on the Government. These subdivisions will so follow into a treatment of the Summation of the Aforementioned Factors on the Economy, before pulling into a Conclusion.

2. Definition of Concepts

Hiv: Human Immunodeficiency Virus: A sexually contracted virus that causes AIDS.

Acquired immune deficiency syndrome: A disease of the immune system caused by the retrovirus HIV, where persons lose the ability to contend infections, frequently deceasing from secondary unwellnesss.

( Note: Afterlife, the constructs HIV and AIDS will be used interchangeably. )

CG ‘s: Conditional Grants: Grants afforded by the authorities to Organisations in order to handle and pull off its members who suffer from HIV/AIDS.

3. Economic Impact of HIV/AIDS in South Africa

Figure 1 gives a in writing and structural position of how the macro-economy is affected by the HIV pandemic. This model besides represents theoretical analysis that this paper will follow to acquire a better apprehension of the impact of the disease on the South African economic system.

Figure 1: Structural channels of HIV/AIDS impact Beginning: Vass ( 2005:2 )

In the subdivisions to follow the impact of the pandemic will be analyzed from a macroeconomic point of position.

3.1. Impact on the Individual and on Families:

Persons suffer from the disease, non the economic system, and therefore, Persons will be addressed foremost ( BER, 2007:11 ) : The most noteworthy economic consideration for Persons enduring from HIV/AIDS is the fact that they frequently need to pass big parts of their disposable income on interventions, such as antiretroviral intervention, and non on bettering their economic standing. Other noteworthy points are absenteeism or early retirement ( if employed ) from employment due to illness, which hinder single income dramatically whilst outgo remains stable or even additions.

The Bureau for Economic Research ( BER, 2007:11 ) besides specifies that the economic impact of HIV/AIDS on families chiefly stems from its impact on income and outgo of such families. A South African survey conducted by Casale ( 2006:11 ) found that on norm, households spend a tierce of their monthly income on HIV and AIDS related medical disbursals. This dramatically lowers the possibility of bettering their fiscal and economic standing.

It is besides assumed that increased AIDS deceases among the economically active population is likely to impact negatively on the dependence ratio, more specifically ( Vass, 2005:16 ) : hapless families will confront increasing income exposure as a consequence. Furthermore, these families may hold to transport the fiscal load when those employed, but infected, retire from work and return to have attention.

Garbus ( 2003:69 ) undertakings that, by 2010, AIDS may lend to the chronic poverty of 26 % to 33 % more families than would hold been the instance in the absence of the pandemic. In the undermentioned subdivision the effects that is carried over to the labor market will be discussed.

3.2. Impact on the Labour Market:

Table 1 illustrates the patterned advance of HIV/AIDS through the labour force and the possible impact in footings of the increased cost load to companies and other sectors.

Table 1: Costss in the labor market associated with HIV/AIDS Beginning: Vass ( 2005:15 )

It is apparent that there is a jutting load of HIV/AIDS over 10 twelvemonth sections ( on norm ) for the labour market. This will impact on both low skilled workers and the overall skills-biased flight in employment across most economic sectors. Jones ( 1996:45 ) lends support to the theory by stating that HIV infection will go progressively of import for concerns in the 2nd decennary of the epidemic since most of the people populating with HIV are between 25 and 44 old ages of age. That makes up over half of the work force in South Africa.

Premature grownup mortality is doing fewer workers available and causes increasing production costs. HIV/AIDS unwellness and decease are taking to major accomplishment spreads in the workplace ( Garbus, 2003:61, 62 ) . Increasingly so, older and younger people will hold to come in or stay longer in the labor market, which dramatically alters its composing and effectivity.

Mohr, et Al. ( 2004:583 ) corroborates this, stating that an estimated 20 % of the grownup population in South Africa was HIV infected. This drastically affects the size and composing of the labor force through absenteeism, unwellness, and a loss of accomplishments and experience.

This assault on the labor market composing will be the prevalent state of affairs unless redresss such as mechanisation and engineering develop plenty to contradict this menace. Such redresss will better single productiveness within the workplace, finally, increasing the demand for a less skilled work force. Harmonizing to Garbus ( 2003:61-62 ) the International Labour Organization undertakings that ; South Africa will lose 10.8 % of its labour force by 2005 and 24.9 % by 2020.

The economic impact of HIV/AIDS within the labour market later influences Firms and General Industry, therefore impacting the overall macro-economic impact of the pandemic. This will be discussed in the undermentioned subdivision.

3.3. Impact on Firms and General Industry:

AIDS-related unwellnesss and deceases to employees impact a house by both increasing outgos and cut downing grosss ( Bollinger, et Al. 1999:6 ) . Outgos are chiefly increased for wellness attention costs, burial fees, preparation and enlisting of replacing employees. Grosss are to a great extent affected by absenteeism of employees, which in bend leads to a labour turnover with a less experient and productive labor force.

Yet, investing is the cardinal linkage between concern and macro-economic growing ( both in production and knowledge edifice ) . However, the HIV/AIDS consequence in the long-run will be less attractive and could even deter puting in human capital by industry because of low returns ( Casale, 2006:23 ) .

The pandemic can impact single houses both on the supply side ( efficiency losingss and subsequent higher production costs ) and on the demand side ( alteration in the demand for goods and services produced ) . A significant figure of South African companies are already enduring the effects of the pandemic, with 40 % of makers and 60 % of mines describing a loss of experience and of import accomplishments within their administration ( Casale, 2006:23 ) . Larger companies and those using chiefly semi and unskilled workers have been the most badly affected and this will go on to intensify. What besides emerges is that production costs have been affected preponderantly through labour productiveness and worker absenteeism, followed closely by employee benefit costs.

Approximately a 3rd of the companies surveyed by The Bureau for Economic Research ( BER, 2007:55 ) study responded that HIV/AIDS has already had a negative impact on net incomes, with more than half anticipating an inauspicious impact on profitableness in five twelvemonth ‘s clip. HIV/AIDS had a more noticeable impact on the production side of concern, with more than 30 % of all houses surveyed describing that HIV/AIDS has reduced productiveness or increased their absenteeism. They besides reported raised costs in employee benefits and increased labour turnover rates, which had an inauspicious impact on corporate nest eggs and net incomes, restraining fixed investing ( BER, 2007:12 ) .

Casale ( 2006:7 ) provinces that the effects of HIV and AIDS on concern links micro-level behavior and results ( e.g. families, employment determinations ) to macro sums ( e.g. production, employment and growing ) . Decisions at a concern degree can interpret into alterations in national investing, demand for goods and services, employment and economic construction.

In the undermentioned subdivision it will be noted that HIV/AIDS besides has some sever affects on the authorities.

3.4. Impact on the Government:

Government outgo is the chief country of focal point within this subdivision, with a brief extract on its policies to relieve the negative economic impact of the pandemic. The Government ‘s function in public wellness will go on to be placed under increased demand due to direct duty. Outgo on the pandemic by Government will go on to turn in an effort to pull off the disease ( Hickey et al, 2003:89 ) . The best signifier of such outgo has been in the signifier of CG ‘s ( when viewed in footings of outgo versus consequences ) .

Figure 2 represents a model that indicates how authorities is helping with the pandemic. The figure simply tries to give a better apprehension of how financess are allocated to help this planetary catastrophe.

Figure 2: Government disbursement on HIV/AIDS Beginning: Hickey et Al ( 2003:4 )

Since wellness attention and related HIV/AIDS disbursals are lifting, resources available for investing by Government, the private sector, and families are dramatically reduced. This straight affects the Government ‘s full macro-economic mentality and its probationary construction ( Garbus, 2003:61-62 ) . This frequently entails reallocation of resources from other sectors but is really likely to cut down the rate of economic growing.

An of import challenge for the authorities will be the increased fiscal load stemming from higher public wellness attention and other societal disbursement such as surrogate grants and institutional attention for orphans and will likely co-occur with decreased revenue enhancement grosss. Increased direct and indirect costs will cut down private sector net incomes, which are likely to hold an inauspicious impact on economic growing and rewards, bespeaking an eroding of the revenue enhancement base and lower Government gross ( BER, 2003:12, 13 ) . In all likeliness, HIV/AIDS will take to a displacement in disbursement from “ more to less productive avenues ” ( e.g. from public sector fixed investing to wellness attention services ) .

On the policies front, the persistently high degree of new HIV infections happening in South Africa reflects the troubles that have been faced by Government ‘s AIDS instruction and bar runs ( Anonymous ) . The hereafter of the pandemic, at least partially depends on the way of the Government ‘s HIV and AIDS policies. Although the Government has been widely criticized in the yesteryear for its AIDS policies, recent schemes ( including the development of a new model to steer the national response to AIDS from 2007 until 2011 ) suggest a more balanced mentality for supplying some economic alleviation from the pandemic.

Execution of a multi-sectoral incorporate HIV/AIDS response in South Africa depends upon the successful pattern of co-operative administration rules – both vertically and horizontally. Horizontally, HIV/AIDS demands the engagement, investing and co-operation of national sections besides wellness. Vertically, Government ‘s response to HIV/AIDS is coming up against a basic tenseness inherent in our inter-governmental financial system. This fundamentally means that states are chiefly responsible for societal service bringing yet are overpoweringly reliant upon nationally sourced gross. Therefore, a major issue in HIV/AIDS funding scheme is the grade of national control over provincial resource allotment and service bringing ( Anonymous ) .

3.5. Summation of the Aforementioned Factors on the Economy:

After integrating all the aforementioned factors, the consequence of HIV/AIDS on the South African economic system is, and will go on to be major. For illustration, by 2045-50, South Africa will hold the universe ‘s 10th-lowest life anticipation at birth. Between 2000 and 2050, life anticipation will be 27 % to 41 % lower than it would hold been in an “ AIDS-free ” scenario. The population will be 44 % smaller in 2050 than it would hold been without the pandemic, seting inordinate strain and demand on the labour force every bit good as human capital ( Garbus, 2003:9-11 ) .

Harmonizing to a June 2003 study from the World Bank, old surveies have earnestly underestimated the economic impact of the AIDS pandemic, neglecting to admit the impact of instruction and rearing on the economic system. When a projection theoretical account was applied to South Africa, the World Bank found that in the absence of AIDS, South Africa would hold enjoyed modest, though speed uping growing of per capita income, with cosmopolitan and complete instruction attained within three coevalss. With AIDS, nevertheless, if no attempts were put away to battle the pandemic, a complete economic prostration within the same three coevalss was projected ( Garbus, 2003:9-11 ) . As a simple illustration, by 2050, per capita income per household will be half the sum it was in 1990. South Africans without entree to occupations ( peculiarly those that require high accomplishment degrees ) are likely to bear the brunt of the HIV/AIDS pandemic, whereas comparatively skilled workers could really profit from greater employment chances ( as production becomes more skill- and capital-intensive ) and higher rewards ( as the comparative demand for skilled labor additions ) .

Furthermore, projections published by the World Bank in 2000 found that by 2010, South Africa ‘s gross domestic merchandise will be 17 % lower than it would hold been in an “ AIDS-free ” scenario ( Garbus, 2003:60 ) . About half of this diminution is attributed to displacements in current Government disbursement toward wellness outgos, thereby increasing the budget shortage and cut downing entire investing. About tierce of this diminution is the consequence of slower productiveness growing and about 8 % of it was attributed to AIDS mortality and its consequence on population growing. The theoretical account suggested that the net consequence of a higher AIDS-related mortality and slower growing rate will go forth the unemployment rate mostly unchanged.

The HIV/AIDS pandemic will set particular force per unit areas on the populace sector. One of the most seeable effects of the pandemic will be an addition in the figure of people seeking medical attention: significant proportion of the HIV/AIDS victims will be likely to turn to province infirmaries for medical attention ( Anonymous ) . The fiscal strain on the public wellness sector could be terrible, non merely as a consequence of the sheer figure of people seeking such attention, but besides because wellness attention for AIDS patients is more expensive than for most other wellness conditions.

It may be argued nevertheless, that given that the labor market drivers of growing in the South African economic system are based on a trust on a comparatively little proportion of the labour force ( the extremely skilled and skilled in selected sectors ) , and a capital intensive cost construction, the attendant distribution of HIV infections and mortality will non impact significantly on aggregative economic indexs ( Vass, 2005:4 ) . The inauspicious impact of the epidemic on the size of the population will outweigh the negative impact on existent GDP ( BER, 2003:12-13 ) .

In summing up, the foreseeable danger is a concatenation of effects that may transform themselves into a downward economic spiral ( Casale, 2006:21 ) : Lower growing could deter investing, which could, in bend, hinder economic growing potency by cut downing the handiness of capital as a production factor for illustration.

4. Decision

South Africa seems destined to dawdle behind in reacting to the pandemic. A remedy has non been found as of yet, therefore the following logical measure ( the group thinks ) would be the effectual direction of the economic impact the pandemic will hold. Ultimately this is felt in the country of health care and grants by the Government. In order to protect HIV/AIDS as a national precedence in the budget without puting up perpendicular programmes that are inefficient from a wellness attention service bringing position, it would be prudent to go on the focal point the Government soon places on both these countries. Webb ( 1997:73 ) helps formalize this position, saying that the pandemic can be stimulated indirectly through a lessening in wellness attention proviso.

By and large the HIV/AIDS conditional grants are working and should go on. It is besides critical to understand that an improved path record occurred despite monolithic additions in CG allotments twelvemonth to twelvemonth. Another manner to depict this is that national authorities is reacting to the pandemic by quickly increasing allocated financess, as good it should ( Hickey et al, 2003:89 ) . However, realistically, it must be understood that this places extraordinary outlooks on provincial direction. Improvements, nevertheless little, to the economic impact of the pandemic are likely to go on if undertakings and major developments are designed suitably. International trends suggest that such plans designed address specific jobs that can extenuate the impact of AIDS by merely turn toing some of the most terrible jobs first, and with the most strength.

As is apparent from the above, there are a big figure of factors that drive the HIV/AIDS pandemic and, at the same clip, are impacted by it. This is true for all sectors and all degrees of the economic system ( micro, sectoral and macro ) . It is of import to take into history the complex relationship between socio-economic variables and HIV/AIDS when covering with phenomena such as employment and poorness at a micro-level, every bit good as economic growing at a macro degree.


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