EFFECTS OF HIV/AIDS ON THE ECONOMIES OF SOME AFRICAN COUNTRIES

Effects of HIV/AIDS on the economies of some African countries

Effects of HIV/AIDS on the economies of some African countries

Introduction

The macroeconomic effects of HIV/AIDS in Africa are substantial, and policies for dealing with them may be controversial—one is whether expensive antiretroviral drugs should be targeted at economically productive groups of people. The authors review the evidence and consider how economic theory can contribute to our response to the pandemic. Three million people died from AIDS in 2001, making it the world's fourth biggest cause of death, after heart disease, stroke, and acute lower respiratory infection (UNAIDS, 2001). Over 70% of the world's 40 million people living with HIV/AIDS are in Africa (table 1). Besides the human cost, HIV/AIDS is having profound effects on Africa's economic development and hence its ability to cope with the pandemic. While the impact of HIV/AIDS on people has been well documented, it has been much more difficult to observe the pandemic's effects on the African economy as a whole or to assess how it might affect Africa's future development. Nevertheless we need to understand these broader economic effects to form effective policy responses.

Discussion

We used economic theory to predict what happens to economies faced with rapidly increasing mortality and morbidity. We reviewed empirical studies that have attempted to quantify the macroeconomic effects of the HIV/AIDS pandemic. We found these studies by searching EconLit, Medline, PubMed, Embase, science and social science citation indexes, and key websites (International AIDS Economic Network, UNAIDS, the World Bank, and the World Health Organization). We also contacted key researchers, and we did a secondary search of the bibliographies of all the studies we found. Unfortunately there have been few studies of the macroeconomic implications of the HIV pandemic and few economic evaluations of interventions to combat the disease.

The HIV/AIDS pandemic has an impact on labour supply, through increased mortality and morbidity. This is compounded by loss of skills in key sectors of the labour market. In South Africa, for example, around 60% of the mining workforce is aged between 30 and 44 years; in 15 years this is predicted to fall to 10% (R Elias, University of Botswana, personal communication, 2000) (figure). In the South African healthcare sector 20% of student nurses are HIV positive (Altenroxel, 2000).

The long period of illness associated with AIDS reduces labour productivity. One review reported that the annual costs associated with sickness and reduced productivity as a result of HIV/AIDS ranged from $17 (£12; €19) per employee in a Kenyan car manufacturing firm to $300 in the Ugandan Railway Corporation (Bollinger & Stover, 1999). These costs reduce competitiveness and profits. Government incomes also decline, as tax revenues fall, and governments are pressured to increase their spending, to deal with the rising prevalence of AIDS, thereby creating the potential for fiscal crises.

Lower domestic productivity reduces exports, while imports of expensive healthcare goods may increase. The decline in export earnings will be severe if strategic sectors of the economy are affected, ...