Tilahun GMedhin

Human being is the key resource for development. But, HIV/AIDS is taking thousands of lives every year mainly in the Sub-Saharan Africa. This paper tries to show the socio-economic impacts of the pandemic disease in the region so that readers will be able to understand the magnitude of the damage today and the implications for the future.

According to estimates from the UNAIDS/WHO AIDS epidemic update, 37.2 million adults and 2.2 million children were living with HIV towards the end of 2004 (AVERT 1). Other estimates by the Joint United Nations Program on HIV/AIDS indicate that 7.5 percent of the population aged 15-49 was infected as of the end of 2003, with HIV prevalence rates for this age group ranging from about 1 percent to 40 percent in Gambia and Senegal (qtd. in Haacker xi). A UN press release reveals alarming News stating HIV/AIDS is having a devastating demographic impact and has become one of the biggest threats to development in the Sub-Saharan Africa. According to the press release, one of the key findings of a new UN report is that HIV/AIDS has already killed over 20 million people and it will cause about 100 million excess deaths until 2025 in the region (Screen 1). Most alarming is that the Sub-Saharan Africa is home to two-thirds of all people living with HIV/AIDS although the population size is a little bit more than 10 percent of the World’s population (AVERT 1). Undeniably, HIV/AIDS has become one of the leading causes of death in the region. Nevertheless, although it is readily agreed that HIV/AIDS is a devastating health problem, it is not generally seen as a development barrier (Cohen 1). In fact, the economic and social consequences of the increased mortality and morbidity associated with HIV/AIDS are serious and manifold: it erodes human capital, exacerbates poverty, and impacts government finance and public service in the region.

The immediate impact of HIV/AIDS, presumably most people are aware of, is at household level. The household impacts begin as soon as a member of the household starts to suffer from HIV-related illness. Death is inevitable. In addition to the trauma of losing family members, households affected by HIV/AIDS experience an abrupt decline in living standards because of loss of income and the high cost of caring for the sick. For the fact that HIV/AIDS causes a long period of illness, the loss of income and the cost of caring for family members impoverish the household. According to Bollinger and Stover a study of adult mortality in Tanzania finds 8 percent of total household expenditure on medical care and funerals in households that had an adult death in the preceding 12 months compared to 0.8 percent in households with no adult death. In Cote d’Ivoire, households with HIV/AIDS patient spend twice as much on medical expenses as other households (2). Besides, the loss of few workers at the crucial periods of planting and harvesting significantly reduces the size of the harvest. A study by the Zimbabwe Farmers Union shows the death of a breadwinner due to AIDS would cut the production of maize in small-scale farming and communal areas by 61 percent (qtd. in Bollinger and Stover 3).

Household poverty increases as the breadwinners die. Thus, savings dwindle and families begin to fragment economically. One implication of this fragmentation of families is the rising numbers of orphan children in the region. Recent estimates by the Commission on HIV/AIDS and Governance in Africa (CHG) put the figure of orphans in Africa in the range of thirteen to fifteen million children (6). The Commission reports a dramatic decline in life expectancy to levels not seen since the 1960s and reversal of hard won gains in child survival. In Zimbabwe, for example, life expectancy is 40 instead of 69. In fact, seven countries in Sub-Saharan Africa: Angola, Botswana, Lesotho, Malawi, Mozambique, Rwanda, and Zambia have life expectancies below 40 years of age (3). HIV/AIDS, therefore, constrains the overall food security of the households in the region.

The impact of HIV/AIDS extends to business enterprises. AIDS related illnesses and deaths to employees affect an enterprise by increasing expenditures and reducing revenues. Expenditures increase for health care costs, burial fees and training and recruitment of replacement employees. The cost of replacing experienced workers and paying health and death benefits is becoming a serious financial drain on business. One study in Zimbabwe estimates the total costs of AIDS to a Transport Company to be 20 percent of its profit (Bollinger and Stover 4). Revenues reduce because of low productivity of victims, absenteeism due to illness or attendance at funerals and time spent on training. Another study examining several firms in Botswana and Kenya concludes that the most significant factors in increased labor costs are absenteeism due to HIV/AIDS and increase in burial costs. The increase in labor costs reduces the profits that are necessary for expansion. Labor turnover is also less productive. Thus, HIV/AIDS debilitates the enterprises’ finance and constrains future expansion.

Equally important but less perceived by the majority of the public is the sectoral impact of HIV/AIDS. HIV/AIDS threatens the viability of health-care system. Treating AIDS and related opportunistic infections is placing heavy burdens on the health systems of the Sub-Saharan countries. Bollinger and Stover report that half of the hospital beds in Africa are occupied by AIDS patients (6). The structural implications of HIV related mortality on public services is also projected to be quite severe. A study of the epidemic on the public sector in Malawi illustrates that vacancy levels in government ministries rose as high as 58 percent in the Ministry of Education. It also concludes that there was “sufficient evidence of a high magnitude of human resource capacity erosion in the public service between 1990 and 2000” (CHG 9). Therefore, where HIV prevalence is high, experienced workers are lost and funds for investment are diverted to pay for health care and support of afflicted families, which in turn undermine prospects of development today and for many years to come.

Furthermore, HIV/AIDS affects the macroeconomic performance. According to Haacker, economic growth slows for many reasons most directly because the working-age population expands more slowly or contracts though there are a considerable uncertainty regarding the size of the effect. He says, “The most visible fiscal consequences of HIV/AIDS include increased spending on prevention, care and treatment, but the fiscal implications go far beyond this. As economic growth declines, the domestic tax base weakens and domestic revenues fall. At the same time, HIV/AIDS erodes public services as mortality rates for civil servants rise, and it drives up government spending even in areas not directly related to combating HIV/AIDS” (xii). Sarbib, a Senior Vice President of the World Bank’s Human Development Network, says, “It is widely known that in the most affected countries, the pandemic has eroded the economic and social gains of the past thirty years” (qtd. in Jackson, Theis, and McMahon screen 1). Hence, HIV/AIDS weakens the economy and has begun to stall economic development.

Least recognized by the general public is the intergenerational impact of HIV/AIDS. The simple fact that AIDS kills young adults can have profound implications for the whole economy today and in the future. By killing young adults often in the prime of their lives, AIDS has an effect not only on its victims, but also on their children. Children of AIDS victims are less able to attend school and also miss out the life-skills that parents teach their children. In this way, AIDS cuts-off the mechanism by which human capital, the engine of long-term economic growth, is transmitted from one generation to the next. If the outbreak of AIDS causes the next generation to be less educated, it means that they, in turn, are less able to provide for their children’s education, and so on.

In the absence of any government intervention, a report on “The Macroeconomics of HIV/AIDS” cautions that an otherwise growing economy severely affected by HIV/AIDS could contract to about one-third its size in three generations. Devarajan, a co-author of the new research findings, says, “AIDS does much more than destroying the existing ability and capabilities – the human capital – embodied in its victims; it also weakens the mechanisms through which human capital is formed in the next generation and beyond” (qtd. in Jackson, Theis, and McMahon screen 1). Indeed, HIV/AIDS is distorting the very fabric of everyday life in the region, with profound implications for both social and economic development for succeeding generations (CHG 4).

Altogether, HIV/AIDS, through its demographic effects and its social and economic consequences, has evolved into a major threat to economic development in the Sub-Saharan Africa. Millions are dying. People are facing a day-to-day experience of declining standards of living, reduced capacities for personal and social achievements, an increasingly uncertain future and a diminish capacity to maintain what has been secured over past decades in terms of social and economic development. Average life expectancy has declined by a significant number of years. Its impact on the labor force, households and business enterprises has become a brake on economic growth and development. Lamentably, the prognosis is also daunting since the pandemic HIV/AIDS has no geographic boundary particularly in the era of globalization.

Works Cited

AVERT. “Worldwide HIV & AIDS Epidemic Statistics.” AVERT, an International AIDS Charity 1 Apr. 2005. 24 Apr. 2005 < http://www.avert.org/worlstatinfo. htm>.

Bollinger, Lori, and John Stover. “The Economic Impact of AIDS.” The Futures Group International (1999). 22 Apr. 2005 <http://www.iaen.org/impact/stovboll.pdf>.

Cohen, Desmond. “Poverty and HIV/AIDS in Sub-Saharan Africa.” UNDP HIV and Development Programme Paper No. 27. 22 Apr. 2005 <http://www.undp.org/

hiv/publications/issues/english/issue27e.html#POVERTY%20AND%20HIV/AID S%20IN%20SUB-SAHA>.

Economic Commission for Africa. “Africa: The Socio-Economic Impacts of HIV/AIDS.”

Commission on HIV/AIDS and Governance in Africa (undated). 25 Apr. 2005

< http://www.aec.msu.edu/agecon/fs2/adult_death/SOCIO_ECO_IMPACT.pdf>.

Haacker, Markus. Foreword. The Macroeconomics of HIV/AIDS. Ed. Markus Haacker. International Monetary Fund, 2004. IMF.org: Publications. 22 Apr. 2005

<http://www.imf.org/external/pubs/ft/AIDS/eng/foreword.pdf>.

Jackson, Stevan, David Theis, and Cynthia C. McMahon. “New Report Warns of Long- Term Economic Impacts from HIV/AIDS.” The World Bank Group 1 Dec. 2004. 25 Apr. 2005 <http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/

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United Nations. “New UN Report Cites Devastating Effects of HIV/AIDS.” Press

Release AIDS/82 POP/908 16 Sep. 2004. 22 Apr. 2005 <hhtp://www.un.org/ News/Press/docs/2004/aids82.doc.htm>.