Nawaal Deane, Johannesburg | Friday
THE spread of HIV/Aids in South Africa has contributed significantly to the decline in foreign direct investment (FDI), according to BusinessMap’s investor survey released this week.
The HIV/Aids crisis has increased the risk profile for investment in the Southern African region, with investors seeking a premium rate of return of 15% to 20% in South Africa and above 25% in the rest of Southern Africa.
The survey points out denial of the HIV/Aids pandemic has “only hardened investor sentiments” and has failed to take cognisance of remedial measures being implemented by a number of companies.
According to UNAids statistics, sub-Saharan Africa accounts for 25-million of the 36-million people worldwide living with HIV/Aids.
The survey states that although South Africa has the highest number of people living with HIV/Aids in the Southern African Development Community (SADC) its relatively good infrastructure makes it an attractive recipient for FDI.
The Stellenbosch Bureau for Economic Research (BER) has forecast that economic growth rates are expected to be depressed by the impact of HIV/Aids.
The BER model, reproduced in the BusinessMap survey, offers two economic scenarios for South Africa – one assuming an Aids epidemic and another ignoring it.
The model shows real gross domestic product 1,5% lower by 2010 in the Aids scenario than in the non-Aids prediction, and 5,7% lower by 2015 in the Aids scenario.
There will be declines in the average annual growth rate of 0,1% (2002-2005); 0,3% (2006-2010) and 0,9% (2011-2015).
Macroeconomic performance will be hard hit by HIV/Aids infection, resulting in a reduction in human capital and a negative impact on consumer spending, which will shift to health care and funeral expenses.
The South African government is likely to suffer from larger deficits with increased public sector spending on health care resulting in lowered spending in other sectors like capital expenditure.
There is still disagreement on the likely impact on inflation and interest rates but most predict a negative slant.
The mining sector will be the most affected by the increase of HIV infection, followed by transport, insurance agencies and retail industry.
“A 1999 study of miners in Southern Africa found that more than a third of employees in their late 20s and 30s were infected with HIV,” says the survey.
Insurance companies and medical aid schemes face pressure due to an increase in health care costs and shortened life expectancy.
The survey focuses on strategies and measures that can be incorporated into business to manage and reduce HIV/Aids impact, including condom distribution, volunteer counselling, free testing and restructuring of employee benefits.