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AIDS Poverty and Human Development

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AIDS Poverty and Human Development HIV, growth, poverty and inequality in sub-Saharan Africa Robert Greener UNAIDS1 Cape Town, South Africa June 9-11, 2008 HIV, growth, poverty and inequality in sub- Saharan Africa DRAFT, April 2008 Robert Greener, UNAIDS1 BACKGROUND It has often been asserted that AIDS is driving a "vicious circle", caused by the "downstream" impacts of AIDS which increase poverty and social deprivation, and the "upstream" effects of social deprivation which potentially increases the societal vulnerability to HIV infection. When examining this assertion, it is important to distinguish clearly between the two different potential directions of the effects. HIV Infection “Upstream” “Downstream” Poverty and Social Deprivation 1 This paper also uses material from Piot, Greener, Russell (2007) and from Gillespie, Kadiyala, Greener (2007). 1 HIV, growth, poverty and inequality in sub-Saharan Africa As will be seen, the downstream impacts of AIDS on individuals and households are well understood and documented. The economic impacts of AIDS are proportionately greater for poor households, and AIDS can be expected to increase both poverty and income inequality. The economic impact at higher levels of aggregation (such as on the gross national income – GNI) is less well understood, being inferred from modelling work rather than empirical measurement, but is thought to be important in the long run, particularly in high prevalence countries, such as in southern Africa. Evidence of the upstream effects of poverty and social deprivation on HIV infection is rather mixed. In general, the view that poverty is a principal driving force behind the epidemic is not well supported either at national or at household level, although there is a clear protective role for education. The implication for economic policy and strategies for economic growth is complex and context specific, but it is clear that the countries with high or growing HIV epidemics need to place HIV at the core of their development strategies. THE "DOWNSTREAM EFFECTS": THE IMPACT OF AIDS ON POVERTY AND DEVELOPMENT Household Impact and Poverty AIDS kills people in the prime of their working and parenting lives, and has a devastating effect on the lives and livelihoods of affected households (for example, see Jayne et al. 2006), who face reduced incomes when employed household members become sick or die, and increased medical and funeral related costs. The impact on poor households is clearly disproportionate, with many struggling to meet demands for treatment and care.2 2 For a comprehensive survey of literature on HIV impacts see Gillespie and Kadiyala (2005). 2 HIV, growth, poverty and inequality in sub-Saharan Africa As a result, we can expect that AIDS will impede efforts to reduce poverty – even in countries with relatively low levels of prevalence. In high prevalence countries such as Botswana, estimates have projected an increase of about 5 percent of the number of households living in poverty, compared to the situation without AIDS (Greener 2004). Existing policies and programmes aimed at poverty reduction will need to include specific measures to identify and target the economic and social needs of households who are directly affected by AIDS. Policies relating to the support, care and education of orphans will need to be able to respond to the orphan crisis. AIDS will dramatically increase the numbers of orphans, particularly in high prevalence countries. More than 15 million children worldwide have been orphaned by AIDS – over 12 million of them in sub-Saharan Africa, threatening to overwhelm the capacity of social networks and traditional patterns of intergenerational dependency, and creating an under-educated, unsocialized and often uncared for generation (Barnett and Whiteside 2006). Firms and Enterprises Companies in high prevalence countries can expect to face increased mortality and illness among the workforce, leading to higher costs of recruitment and training to replace the experienced workers that have been lost. Firms that provide their workers with medical insurance can expect the premiums to rise in order to pay for the increased medical costs. Pension funds will also need to be adjusted to cope with changes in the age structure of the workforce. At the same time, increased levels of illness, as well as the loss of skills and experience can be expected to have a negative effect on productivity in the workplace. This translates into decreased profitability, and the risk of declining employment at a national level. 3 HIV, growth, poverty and inequality in sub-Saharan Africa One study in Africa has found widely varying HIV related costs varying from 0.5-10 percent of the total labour costs – which in some sectors would constitute a very significant proportion of company profit (see the table below).3 Table 1: Estimated costs of AIDS for enterprises in sub-Saharan Africa Cost per AIDS death Aggregate annual Estimated HIV or retirement Sector Country Size costs prevalence (multiple of annual (% of labor costs) compensation) Retail South Africa 500 10.50% 0.7 0.50% Agribusiness South Africa 7,000 23.70% 1.1 0.70% Uganda 500 5.60% 1.9 1.20% Kenya 22,000 10.00% 1.1 1.00% Zambia 1,200 28.50% 0.9 1.30% Manufacturing South Africa 1,300 14.00% 1.2 1.10% Uganda 300 14.40% 1.2 1.90% Ethiopia 1,500 5.30% 0.9 0.60% Ethiopia 1,300 6.20% 0.8 0.60% Media South Africa 3600 10.20% 1.3 1.30% Utility South Africa >25,000 11.70% 4.7 2.20% Mining South Africa 600 23.60% 1.4 2.40% Botswana 500 29.00% 4.4 8.40% Tourism Zambia 350 36.80% 3.6 10.80% Government and the Macroeconomy Government and the public sector are similarly affected by increases in employment costs, but also as a result of a falling revenue base (to the extent that economic growth is affected), and increased demands for health and other public services related to the response to the epidemic. AIDS can therefore be expected to cause significant challenges for budgeting and economic management as countries try to scale up services to provide universal access to prevention, treatment and care. Macroeconomic growth is expected to be reduced by the AIDS epidemic, as a result of reduced human resource capacity, and also because of reduced investment that results from lower household savings. At a national level, the macroeconomic impact is expected to be comparatively small when compared to the influence of other factors related to the global 3 Data and table taken from Simon, Rosen, Feeley, and Connelly (2006). 4 HIV, growth, poverty and inequality in sub-Saharan Africa economic environment and the quality of economic management in affected countries. Most estimates making use of standard economic models in high prevalence countries indicate a reduction of about 0.5-1.5 percent4 in the GDP growth rate over a 10-20-year time frame compared to the situation without AIDS5. Although serious, this is within the range that can possibly be dealt with in the medium term through corrective macroeconomic policies. Impact in lower prevalence countries can be expected to be correspondingly lower. However, some researchers have pointed out that AIDS is a long wave event, and have speculated that long-run economic impact may be somewhat greater, because of the potential for progressive weakening of human capital, and the lost transmission of knowledge and skills between generations (Bell, Devarajan, Gersbach 2004). If these problems are not addressed or better understood, there may be very severe long-run consequences for the maintenance of social fabric and basic institutions in the high prevalence countries. THE “UPSTREAM EFFECTS”: POVERTY AND VULNERABILITY TO HIV In most areas of public health, there is a strong association between poverty and health status – wealthier countries and wealthier individuals enjoy better health as measured by a variety of indicators such as life expectancy or incidence of waterborne diseases. It has been generally asserted in the past that HIV also follows this pattern, and is primarily a "disease of poverty".6 4 Meaning for example that a growth rate of 6 percent in the absence of AIDS is reduced to a level of 4.5-5.5 percent. 5 For a useful summary, see Haacker (2004). 6 Dr Gro Harlem Bruntland, Director General of the World Health Organization, speech, afrol.com, 4 October 2002 (http://www.afrol.com/Categories/Health/health026_aids_poverty.htm). 5 HIV, growth, poverty and inequality in sub-Saharan Africa Poverty Measures and HIV Viewed globally, the highest prevalence of HIV is indeed found in the poorer countries of the world, with more than two thirds of people living with HIV residing in sub Saharan Africa. Nevertheless, studies during the early stage of the epidemic suggested that HIV incidence initially occurred not amongst the poorest, but among better off members of society in this region. It has been widely assumed that this early association has shifted over time towards greater infection rates among the poorer members of society. However, when viewed regionally within sub Saharan Africa, the highest rates of HIV prevalence are clearly found in the relatively more wealthy countries, such as Swaziland, Botswana and South Africa. Cross-country evidence to date at national level shows that higher HIV rates are associated with higher levels of a number of development indicators,7 notably literacy and nutritional status, and with lower levels of poverty (see figures 1 and 2 below). Figure 1: HIV prevalence, GDP per capita and poverty in sub-Saharan Africa 35% 25% Botswana Swaziland Lesotho 30% Zimbabwe 20% Namibia South Africa 25% Botswana Zambia Lesotho Mozambique e ce c 15% 20%n Zimbabwe Malawi Namibia en e l a Zambia v e South Africa eval r r Mozambique Central African Republic P 15%P V V Malawi 10%I HI H Central African Republic Côte d'Ivoire 10% Tanzania Uganda Gabon Kenya Côte d'Ivoire Tanzania Kenya 5% Cameroon Uganda Nigeria 5% Rwanda Burundi Angola Ghana Ethiopia Gambia Mali Sierra Leone Ethiopia Senegal Burkina Faso Sierra Leone Niger Mauritania Madagascar 0% 0% $100 $1,000 $10,000 0 1020304050607080 GDP per capita (PPP, logarithmic scale) Percentage below $1 per day 7 Meaning that HIV is associated with higher levels of development at aggregate level.
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