HIV/AIDS: A Setback on Small Micro Enterprises

Published on 4th July 2006

Part 1

A lot has been written about the economic impact of HIV/AIDS on businesses and households. Yet we have not clearly looked at the actual financial cost being borne by the society. From one point of view we have seen literature on the cost of drugs and the cost of looking after the aids orphans. To date very little is done on the total impact, which should look at the various types of cost stemming from medical, burial, care for the orphans, discounted loss of revenue from the earnings of those who are affected and finally die.

There are costs of infection and the costs incurred by relatives who get sick. The loss of earnings due to absenteeism by workers as they get treated or look after the sick ones. The employed workers will have an effect on the firm’s productivity, but the self-employed in Small Micro Enterprises will have their families affected by loss of revenue generating activity at the business. Understanding what AIDS costs the society will be useful to the planners and budget administrators in assessing the most effective intervention point.

HIV and AIDS pandemic is alarming in terms of its devastating effect in Africa. In a recent study by the Medical Research Council in South Africa entitled Estimates of Provincial Mortality (2005), it was reported that HIV and AIDS causes on average 30% of all the deaths in the country. Also emphasized by the report on Aids Epidemic Update 2005 is the speed at which the disease is spreading and the deaths it is causing: “Sub-Saharan Africa has just over 10% of the world’s population, but it is home to more than 60% of all people living with HIV-25.8 million…In 2005 an estimated 3.2 million in the region became newly infected, while 2.4 million adults and children died of AIDS. Among the young people aged 15-24 years an estimated 4.6% of women and 1.7% of men were living with HIV in 2005’’ (UNAIDS/WHO: 2005, 17).

This picture calls for urgent attention as the young people are the ones with longer life expectancy and potential to foster entrepreneurship for economic development. If the continent loses the youth at this rate it is just a matter of time before the whole population is extinct.

Financial costs of HIV and AIDS are much higher than what is currently estimated and unless the actual costs are known, the Government budgeting for the disease and the private sector investment on prevention will always be under-funded. Whenever financial costs of HIV and AIDS are spoken of, people only look at the costs, which are obvious. Such costs are well documented, as governments know how much they put for medical care, condoms, ARVs, costs of hospital, funerals and looking after orphans.

There are hidden financial costs, which are not generally addressed in the literature, and therefore a gap exists in cost analysis. The gap exists in determining the potential loss of earnings of those who are affected while young, at the height of their productive capacity. A person of 25-30 years has an active working life of other 30 or so years. The loss of these thirty-plus years is an actual cost and this is what is hidden and has not been addressed adequately. Very little of this has been done. Another gap exists in that businesses and other employers lose a lot of revenue through the absenteeism of the sick employees, through the disruption of work due to hospitalization and deaths.

SMEs are a major employer of Labor. In South Africa the labor force is shared as follows: Informal and micro (39%), Small and medium (27%) and Large (34%). Their share of the GDP in 2000 was 24%, 32% and 44% respectively. In total they share 56% of GDP and they employ 66% of the labor force. The point cannot be gainsaid that the SMEs are an important vehicle for economic development and should therefore be given the attention they deserve. It can be observed from the above statistics that the SMEs are labor-intensive. As such the impact of the pandemic should be heavily felt by these enterprises.

 Psychological Impact

The psychological effect the disease has is large though by large immeasurable. The people affected by the one infected person are many. The children caring for a sick parent or the parent caring for a sick child all live through anxiety waiting for the inevitable death. This creates depression, and a sense of hopelessness. This is even more so if the family does not have the resource to meet the needs of the family and the sick. In some communities people affected by a HIV and AIDS death do not know how to relate with the others. The children left behind are unable to continue the SMEs run by their parents. Girl mothers are not well equipped to take over the roles. To combine the role of mourning the parent and reviving their business is not easy.

 Social Impact

In a number of countries in Africa the disease carries with it stigma. Because of traditional values people refuse to acknowledge the disease. The family members of the sick person may face discrimination from their neighbors. The disease also carries with it a perception of low morality and wrong sexual behaviour. Most communities have failed to accept it as a pandemic that must be confronted openly without stigmatizing those infected. This attitude makes the families affected create negative defense mechanisms.

 Impact on Education Sector

Orphans may have to leave school when the parents die and start working young. School fees may no longer be affordable once the income earner is ill disposed. This affects the future capacity of these children to sustain themselves. With little if any education, they will be negatively affected in becoming entrepreneurs of the future. Lack of education hampers development of SMEs as there is lack of basic skills such as arithmetic or numeracy critical to any business venture. HIV and AIDS amongst teachers leads to absenteeism and replacement costs. There is overloading the teachers who are not sick impacting on the quality of education.

Life Expectancy Impact

HIV and AIDS has had an impact on the life expectancy for many countries in Africa. Young people are the major casualties of this pandemic. Life expectancies declined in a number of countries between 1999 and 2002. A sample of countries quoted were: Lesotho from 48 to 39 years; Swaziland: from 47 to 39 years; South Africa: from 54 to 51 years; Kenya from 51 to 46 years; and Tanzania from 51 to 44 years. In the same period the average life expectancy in Sub-Saharan Africa dropped from 49 to 47. Life expectancy rose in Uganda from 43 to 45, showing that when correct measures are taken, the trend can be reversed.

It is reported by the Department of Health South Africa that 29.5% of women attending antenatal clinics were HIV-positive in 2004. It was also reported that prevalence was highest among women aged 25-34 years one- third of whom were living with HIV and that more than one–third of women aged 20-24 were infected. In the worst affected province of KwaZulu - Natal prevalence has reached 40%. National adult HIV prevalence has risen from less than 1% in 1990 to 25% within 10 years.

In a recent study of death registration based on about 2.9 million death notification certificates, it was reported that deaths of people above 15 years had risen by 62% in five years. Deaths of people in the ages of 25-44 years more than doubled and that about one-third of the deaths were among that age group (approximately 1 million). AIDS is suspected to be the major contributor to the deaths. The same pattern was observed where the prevalence among pregnant women was about 30% in Lesotho, Namibia, and Botswana. In Swaziland the figure rose to 43% in 2004 from 34% in 2000. HIV and AIDS thus has an impact in reducing life expectancy. 

It is from the same group affected by HIV and AIDS that the potential entrepreneurs and participants in SMEs are expected to come from. When the devastating effects of the pandemic are considered it is clear that unless something is done urgently the African continent will soon be faced with crisis of manpower.

Impact on Health Sector

As the HIV and AIDS pandemic spreads there is pressure in the health sector in terms of medicine, staff and pressure on hospitals due to increased hospitalizations, in some countries counting for more than 50% of all hospital beds. It also has negative impact on the overall quality of care due to shortage of beds, staff and overworking of current staff. The hospital workers are also becoming victims of the same pandemic making the cost of training others even higher. Community/Home –based care is another increase on the cost of communities as they care for those who cannot afford hospitals. The costing of the health sector needs is necessary for the national budget as this is the sector required to deal with the cases of the disease.

The Impact on Households

The   impact of HIV and AIDS on households is of importance to the study of SMEs as most of these businesses are run at the family level. The poorest households seem to be hit most by the disease because of their meager resources. In a study on a number of countries in Africa, it has been observed that in some cases some households dissolve after the death of the parents (in Zambia 65% of families). HIV and AIDS strips the family of income earners and assets hence impoverishing them. Incomes in the affected families decline to almost half of those unaffected. Besides the loss of the income earner other family members spend more time looking after the sick instead of generating more income. The disease is also pushing poor families to extreme poverty because of the increase of dependants and reduction of earners.

Poor families reduce their expenditure on basic necessities in order to fund the care of the sick. In a South African study it was found out that the poor families were reducing their expenditures on clothing by 21%, electricity (16%), other services (9%) and food (6%) making about half of the households complain that they were not having enough food. In the rural areas food production is reduced creating more hunger. Home-based care is also another cost incurred, plus costs of funerals. In South Africa, the reported costs of funerals were estimated at between Rand 4000-R 5000 per death. If one takes the average of R4500 (approximately USD 750) this is very high for poor families, given that there may be more than one death in a family in a year and that the income–earner has died. Most families coped through heavy borrowing increasing their burden

Impact at National Level

 At the national level the impacts on the economy have been identified as the additional costs in Public sector especially in heath and education. These costs affect the national budget and deflect resources from development activities therefore affecting economic growth. By reducing economic growth, there are fewer resources for addressing the pandemic and hence a vicious circle is created. The government loses revenues through loss of income taxes, while the demand on the budget increases.

It has been estimated that the rate of economic growth in Sub-Saharan Africa has declined by 2-4%. Forecasts by some studies indicate that Botswana and Swaziland will be growing at 2.5% and 1.1% points less respectively by 2015 and South Africa may face a GDP 17% lower than would have been the case without AIDS. Because of the effect on the population, many countries will be unable to attract industries which depend on low-cost labor. In attempting to measure the actual impact of HIV and AIDS to the economy, one would have to isolate the other factors which are affecting the economic growth. This becomes difficult as they are all tied up together.

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