More than 20 percent of the country's citizens in the 15-49-age group are currently infected and it is estimated that the rainbow nation could lose half of its per capita income in the next few generations if drastic measures aren't taken.
The effect of high adult mortality rates
In the latest World Bank study it was demonstrated that Aids not only destroys existing human capital, but that the disease also weakens the way in which knowledge and experiences are transmitted from one generation to the next, since children of HIV/Aids victims are often left without role models to educate them.
A rise in premature adult mortality also lowers investments in education and the proportion of households that can afford to send children off to school, and orphans are instantly subjected to a life of poverty.
This situation could have a dramatic impact on future productivity, researchers reckon.
The study was led by Prof Clive Bell, professor of economics at Heidelberg University, Mr Shanta Devarajan, chief economist of the World Bank's Human Development Network, and Prof Hans Gersbach, also of Heidelberg University.
An even clearer picture
Previous studies and preliminary assessments pointed to several features of the Aids epidemic that are likely to have severe economic implications.
In another World Bank study on the macro implications of HIV/Aids in South Africa (2000), three characteristics of the epidemic were highlighted for their potential impact on the country's economic activity:
- Aids tends to strike young adults. This means that Aids reduces life expectancy and the rate of population growth, increasing the burden on the working age population – the same population that also needs to look after sick relatives and orphaned children.
- Aids is very slow moving. The time span between infection and death is generally in the range of eight to ten years. Initially, the productivity of the HIV-infected individual will not be significantly affected, but as the infection progresses into full-blown Aids, labour productivity will decline. This has implications for supply of goods and services, while a subsequent increase in medical costs will have implications for demand.
- Infection rates differ by skill class. Previous research indicated that semi-skilled and unskilled workers are more frequently affected than highly skilled workers. This could mean that the average productivity of unskilled labour would decrease and that overall demand for unskilled labour could take a similar plunge as machinery replaces manual labour - a situation that could exacerbate unemployment.
All is not lost
If projections are made from current data to 2010, it looks as if mortality rates will rise to 36 percent for males and 54 percent for females within the next six years. Only 29 percent of children would not experience parental loss, the latest research indicates.
However, all is not lost, experts reckon. If the South African government acts quickly and effectively, economic growth can still be maintained – although to a much lesser degree than would have been the case in the absence of Aids.
World Bank researchers call for a more aggressive approach to combating the epidemic.
Possible solutions
The experts involved in the 2003-released World Bank study suggested the following courses of action:
- Spending on measures to contain the disease and treating the infected with anti-retrovirals in order to prolong lives;
- Aiding orphans, either by providing income support or by subsidising households that send children to school;
- Claiming tax to finance expenditures.
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