The Effect of AIDS on South Africa and Its Economy - Case Study Example

AIDS AND SOUTH AFRICA HIV/AIDS is a major health concern throughout Sub-Saharan Africa. It has had a devastating impact on all segments of the population and effectively reached epidemic levels. It has exacerbated problems in already creaking and underfunded healthcare systems and has created a generation of orphans. Few countries have been as badly affected as South Africa. Indeed, the story of South Africa’s AIDS epidemic is all the more tragic as it provides an unfortunate counterpoint to the hopes and dreams of a nation that ended the terrible policy of apartheid in 1994 believing that anything was possible. Sadly, the challenge of AIDS immediately faced South Africa’s leaders: there was no honeymoon period. While the epidemic has devastated the population—around 5.5 million people are currently infected—costs that cannot be measured, even quantifiable date related to the economy show how horrible AIDS has been to South Africa. Economic indicators measure average income, productivity, and growth, for example: AIDS is affecting all of these. Indeed, because the disease disproportionately effects those who are sexually active—i.e. young people—it has begun to skew South Africa’s demographics: those people who should be in the prime of their lives, and most economically productive, are dying or being impaired by the disease. It is difficult to overstate the severe impact of AIDS on South Africa’s economy. This essay will examine what South Africa’s economy was like before the AIDS epidemic and how it has been shaped and damaged by the epidemic. South Africa is the richest country in Africa, and one with some of the strongest economic and political institutions. It has abundant natural resources and a talented and hard-working population. However, the last 50 years have been very difficult for the country and its population. One of the most important features of the country is its multi-ethnic nature. There are Africans of many different tribes but there are also white settlers from the Netherlands and England, as well as a significant Asian population, as well as any number of people who come from mixed ancestry. This in complexity makes South Africa somewhat unique and also makes it more difficult to solve problems where each group is a significant stakeholder.1 Although settled as a trading country, the path South Africa’s leaders chose in the 1960s laid down a very painful road for the nation. Through the policy of apartheid, South Africa oppressed its black majority and shifted all of the country’s wealth and power into the hands of the small white minority. This created a legacy of distrust and hatred between the people of South Africa. It also greatly damaged the country’s economy by excluding large numbers of people from education, skills-training, and opportunities to build up personal capital. Additionally, and perhaps most damaging because of the resources and talent South Africa can offer to the world, the policy of apartheid so shocked international consciences that it provoked international trade sanctions. South Africa’s apartheid regime was under severe international sanctions for many years. This prevented the economy from building up successful trading ties with other nations; it ruined the country’s reputation as a place to invest; and it set back the economy almost a generation. Indeed, these were all situations that the ANC government inherited when it negotiated an end to apartheid and took power under then-President Nelson Mandela in 1994. It dedicated itself to finding a way forward, to picking up the pieces left behind by the apartheid regime and fashion an open and democratic “rainbow nation.” But no one could have expected the huge damage done to the South African economy by AIDS which for a large portion of the epidemic was extremely fatal for those in the most productive periods of their lives. Before antiviral medication dramatically reduced the fatality of the disease in recent years, making AIDS “manageable,” the vast majority of people who contracted it died. There have been many studies conducted on the subject of AIDS’ impact on the South African economy; it has been looked at from many different angles. The best way to approach the issue would be to look at the economic effect of AIDS on the South African economy from both a micro and a macro level. The best question to start with would be, What is the effect on the personal finances of citizens and businesses? Answering this question will provide valuable insight into the larger question—What is the effect on the economy of the country as a whole? For the average person or family infected with AIDS the costs are massive. There are directs costs in money paid out for medical expenses and for funeral expenses and for potential changes in diet. There are also indirect costs which have perhaps an even larger effect: there is lost time at work due to illness and a lack of promotion or productivity because of the illness.2 The time spent by other families members caring for an afflicted member are also important to consider, as is the massive disruption that occurs when a family members, especially a breadwinner, dies of the disease: students may be removed from school in order to save money, the family may have to relocate to an area with less economic opportunities. The effects are countless and sometimes hard to measure using the average economic indicators that most economist would utilize. Add to these costs, the burden of a huge population of orphans. Studies have shown that hundreds of thousands of orphans have been created by the epidemic. Many of these children will constitute a lost generation as their educational and employment opportunities will be much lower than those of children with parents who can help support them. They are reliant on the state or on an unstable and underfunded foster family system. Children need to feel loved and grow up in a stable environment so they can flourish. These children are very unlikely to have that opportunity. The stigma of orphanhood will also affect them, and they are likely to be more vulnerable to health problems and potentially illegal activities—all of which pose an additional economic cost on South Africa. Businesses are of course badly affected by the health problems of their employees and this problem leads into a larger macro-economic view of the crisis. One company, Anglo-Gold, a major gold mining company based in South Africa, predicted that in the next few years the amount of payroll expenses that go towards these health costs would increase by about 10 per cent.3 For countries considering investing in South Africa—either as foreigners or domestic companies hoping to expand their operations—these payroll expenses make the country a very unattractive place to do business. This is the somewhat insurmountable challenge facing South Africa’s leaders. However, there is some positive news. South African businesses have begun implementing programs to reduce the damage done by HIV/AIDS to their employees. A recent meeting at Davos detailed some of the successes. Their best practices could act as a guide to business in other developing countries. Some of the strongest HIV/AIDS business efforts in the world are in Africa; they include workplace programmes at Anglo American, BMW, Heineken, VW, Standard Chartered and Eskom. In fact, data from 500 large businesses in South Africa show 86% have policies and prevention programmes in place and 65% offer treatment and care to their employees. None of this even gets into discussing the potential huge social problems and social unrest that will continue and likely increasingly parallel the economic problems brought on by AIDS. Now we should look at the macro-economic situation in South Africa. This will look at some of the data and trends that are facing the South African economy as a whole due to the AIDS epidemic. For starters, AIDS affects labour supply as sick workers reduce the pool of available employees. Also people are only somewhat sick reduced their productivity and become less mobile, making the labour supply less flexible. People save less money when they are faced with high medical costs and they buy less affecting consumer spending. As has been pointed out by more than one economist, “A shortage of workers leads to higher wages, which leads to higher domestic production costs. Higher production costs lead to a loss of international competitiveness which can cause foreign exchange shortages.”4 These are extremely serious problems that the leaders of South Africa must take into account if they hope to improve economic conditions in their country. Part of the problem has been that these leaders have been far to slow to deal with the crisis and have not led by example. The president, Thabo Mbeki, has publicly doubted whether HIV causes AIDS on several occasions, which has been extremely unhelpful to those trying to reduce its prevalence. He tends to look at some of the management treatments suggested by western doctors as a kind of medical colonialism—and this view is sometimes popular among people. The former health minister also publicly doubted the value of antiretroviral drugs that have been used to help people manage the disease and suggested instead a traditional diet of potatoes and garlic might be helpful. This is all very sad because people continue to die of the disease all the time and speedy measures are required to help them fight the battle against AIDS. Things, however, appear to be slowly improving. This month a new health minister publicly announced new measures to help South Africa deal with the crisis. South Africas health minister on Tuesday promised a dramatic increase in treatment for AIDS victims to overcome the legacy of a decade of governmental denial of the epidemic. Barbara Hogan said the government wanted to provide AIDS drugs to 1.5 million people over the next three years — up from 700,000 at present, conceding that thousands were without the treatment they desperately need . . . When Hogan was appointed in September, she immediately broke with the discredited policies of her predecessor who promoted garlic and lemons rather than conventional AIDS drugs.5 This is a promising step towards improving the health of South Africans, but also the health of the South African economy, which in the middle of a huge global economic downturn desperately needs all the help it can get. South Africa is a country with many things going for it. It has a long and troubled history, but it has the institutions necessary to pull itself up and out the current AIDS crisis that it faces. The country has what it needs to become the economic heart of Africa. But first it must tackle the AIDS crisis, which has done so much to damage its economy and its hardworking citizens. Works consulted Bollinger, Lori, and John Stover. “The Economic Impact of AIDS in South Africa.” The Policy Project. September 1999. Mwakikagile, Godfrey. South Africa in Contemporary Times. London: New Africa Press, 2008. Nullis, Claire. “South Africa plans to step up its AIDS battle.” Associated Press. February 10, 2009. http://www.google.com/hostednews/ap/article/ALeqM5j9xIuPPc3LovwGSJhMI6M5WdM1QwD968SMP80 “South African Business Praised for AIDS Response” World Economic Forum. June 1, 2005. http://www.weforum.org/en/media/Latest%20Press%20Releases/PRESSRELEASES126 Read More