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HIV/AIDS in South Africa

Since the first cases were reported over 15 years ago, the HIV epidemic has had a devastating impact on South Africa's social structures and development prospects. HIV/AIDS is widely acknowledged as a risk of doing business in South Africa, along with other major risks such as asset security, exchange rate volatility, crime and infrastructure risk. The timeframe in which the epidemic has gained a foothold has been remarkably short: in 1990, South Africa's HIV prevalence was less than 1%. A failure in political leadership to recognise the risk and take action saw the country's prevalence rate climb to 17% in 1997. Only in 2000 did the government develop a comprehensive HIV strategy but by this stage, with national prevalence estimated at 24%, HIV was truly embedded in the population.

Since first emerging in the 1980s, HIV has rapidly become a critical issue affecting the operations of companies in many countries and communities. In parts of Africa, where HIV affects up to one-third of the adult population, businesses have experienced increased production costs, reduced profits and greater difficulty delivering products and services.

Sub-Saharan Africa is the region hit hardest by HIV. South Africa, the largest economy in southern Africa, until recently had the largest population living with HIV. The strategies adopted by companies in these areas over the last ten years to minimise the impact of HIV can provide valuable models to countries with rapidly growing epidemics. Countries with less severe epidemics, such as Côte d'Ivoire (Ivory Coast), also show that HIV can have adverse effects before it reaches the prevalence rates seen in sub-Saharan Africa.

HIV/AIDS in South Africa

Since the first cases were reported over 15 years ago, the HIV epidemic has had a devastating impact on South Africa's social structures and development prospects. HIV/AIDS is widely acknowledged as a risk of doing business in South Africa, along with other major risks such as asset security, exchange rate volatility, crime and infrastructure risk. The timeframe in which the epidemic has gained a foothold has been remarkably short: in 1990, South Africa's HIV prevalence was less than 1%. A failure in political leadership to recognise the risk and take action saw the country's prevalence rate climb to 17% in 1997. Only in 2000 did the government develop a comprehensive HIV strategy but by this stage, with national prevalence estimated at 24%, HIV was truly embedded in the population.

As the epidemic continued to grow, increasing numbers of businesses reviewed their practices and implemented strategies to counter the impact of HIV on their operations. With 30% of South Africa's adults infected with HIV in 2005, company HIV strategies now reach beyond prevention and education to include treatment for employees and their dependents. As the cost of HIV treatment has decreased, it has made economic and social sense to implement these measures to ensure valuable skills remain in the workplace.

Case study

Some African companies had the foresight to develop a HIV workplace strategy well before the government took action. Natural resources giant BHP Billiton began its comprehensive HIV/AIDS response in 1993. This included a review of BHP's business practices to identify if any of its operational practices unintentionally facilitated the spread of the HIV epidemic.

Finding solutions through research BHP's research led to the phasing out of single sex hostels for migrant labour, an increase in local labour recruitment and community development-three important factors in reducing the vulnerability of the company's workforce, and surrounding community, to HIV.

The impact of HIV on business

The South African Business Coalition on AIDS regularly surveys the impact of HIV on businesses in South Africa. In 2003, companies in the manufacturing, retail, wholesale, motor vehicle and construction sectors identified that HIV had already affected many companies negatively, with increased future negative effects predicted. The survey revealed the following key findings:

• More than one-third of the companies surveyed indicated that HIV/AIDS had reduced labour productivity, increased absenteeism and raised the cost of employee benefits.

Key facts

• 30% of companies surveyed reported higher labour turnover rates.
• 27% indicated they had lost experience and skills.
• 24% incurred recruitment and training costs due to HIV.
• 18% of respondents indicated that they predicted the need to appoint extra employees (also known as work shadowing) to compensate for the impact of HIV/AIDS on labour productivity, absenteeism and mortality. (they predict they will need more employees because of the impact of HIV)
• Almost 40% of respondents indicated that the epidemic increased their demand for labour (e.g. via work shadowing or replacement of AIDS-affected workers).
• 12% indicated that the epidemic is negatively affecting their employment decisions, while 48% indicated that HIV/AIDS has no impact on labour demand.
• 8% expect to be able to pass on some of the HIV/AIDS-related costs to their customers by increasing selling prices. However, if companies are not able to recover costs by increasing selling prices, profit margins will come under pressure. Approximately one-third of the companies surveyed reported that profitability has been adversely affected by HIV/AIDS.

Sources

The economic impact of HIV on business in South Africa 2003: Bureau for economic research.

http://www.avert.org/aidssouthafrica.htm

Company related costs

HIV/AIDS affects the productivity of employees when a company's operations are disrupted due to the retirement or death of employees.

For most companies, the most important costs associated with HIV/AIDS are monetary and include medical and death-related benefits, which add to personnel expenses. The table below shows the breakdown of HIV/AIDS-related costs for two companies in Côte d'Ivoire: a food processing company (Company 1) and a textile company (Company 2). One potential cost not cited in the table is death-related benefits (non-funeral grants) paid to surviving spouses and dependent children; these may be in the form of an ongoing pension or a lump sum payment. The HIV prevalence in Côte d'Ivoire has remained steady at 10% since 1997 (UNAIDS 2005).

Costs of HIV/AIDS for two companies in the Côte d'Ivoire (% of total) (Data: 2000)

Ranking of importance of HIV/AIDS-related costs to businesses in South Africa in 2004 according to Bureau of Economic Research (BER)

Source: The Macroeconomics of HIV/AIDS, International Monetary Fund, Edited by Markus Haaker, 2004