Studies estimate that by 2015 more than 10- million South Africans will have died of Aids-related causes Howard Barrell The HIV/Aids pandemic is drastically affecting South Africa’s economic growth and future prospects and will eat into the wealth of those fortunate enough to survive it.
The havoc being wrought by HIV/Aids means that in 2010, the South African economy will be between 17% and 20% smaller than it would have been in the absence of the syndrome, according to a study by two American economists. Moreover, in 10 years, the share of the national wealth of each surviving South African will be 8% lower than it would have been without the pandemic – despite the fact that millions of people will have died by then from HIV/Aids. Notwithstanding these millions of deaths, South Africa’s high rate of unemployment will also be unchanged in 2010. And in some years between now and 2010, South Africa’s economic growth will be as much as 2,6% less than it would have been in the absence of HIV/Aids, according to Jeffrey Lewis of the World Bank in Washington and Channing Arndt of Purdue University in Indiana. Their conclusions are contained in a paper delivered at a conference hosted by the Trade and Industrial Policy Secretariat at Muldersdrift outside Johannesburg earlier this month. It is titled The Macro Implications of HIV/Aids in South Africa: A Preliminary Assessment. Lewis and Arndt developed a model which compared South Africa’s likely economic performance in the absence of the HIV/Aids pandemic against the reality of mass infection that now prevails in the country. In assessing the spread of the disease they relied on, among other studies, two by ING Barings. These show that 500 000 South Africans have already died of Aids-related causes and that, by 2015, more than 10- million South Africans will have died because of the syndrome. Life expectancy by 2008 in South Africa is forecast to have fallen from its pre-epidemic high of 65 years to only 40. The authors say the key question before policymakers is, now, “how to deal with the impending crisis”. They write: “The epidemic has moved beyond its earlier status as a health issue to become a development issue, with social, political and economic dimensions.”
Lewis and Arndt predict that the annual rate of increase of South Africa’s gross domestic product will “decline from year to year through 2008 (to only around 1%) before rebounding slightly in 2009 and 2010”. Differences in real gross domestic product (GDP) growth rates achieved in their two scenarios – one embracing the reality of the Aids pandemic in South Africa, the other a putative “no-Aids” scenario – “reach a maximum of 2,6% in 2008”.
They write: “By 2010, real GDP is about 17% below the level attained in the ‘no-Aids’ scenario.”
They add that, because Aids will cause a shrinkage in both population growth and economic growth, per capita GDP might be expected to grow at a rate comparable to the “no-Aids” scenario. But, this is not what will happen. Instead, “by 2010, per capita GDP is 8% lower in the ‘Aids’ scenario compared with the ‘no-Aids’ scenario”.
For similar reasons, the rate of unemployment in South Africa might be expected to drop in the “no-Aids” scenario. But this is not what they expect to happen. “The unemployment rate for unskilled labour actually increases (although only marginally) as a result of the epidemic,” they write. “While the unskilled labour pool is smaller, slower growth means that the demand for labour is correspondingly lower. These two effects offset one another leaving the unemployment rate essentially unchanged.”