Trendline Dynamics

a leading motor business analyst, and adviser to NADA

AIDS

Over the last 20 years the AIDS epidemic in South Africa has grown rapidly, unseen, unchecked and also almost entirely ignored by business. The epidemic is being described as " nerve gasses spreading on a gentle breeze". A total of 34.3 million people in the world are currently infected with the HIV/AIDS virus of which 71% are living in Sub -Sahara region. Botswana has the highest rate of infection and SA has become the epicentre of the epidemic internationally in terms of annual rate of growth of HIV.

During 1999 an estimated 2.8 million people died of HIV Aids of which 2.2 million were in the Sub-Sahara/African region.

There are 5.4 million new infections of which 4 million are in the Sub-Saharan/African region.

An accumulative number of children, who are HIV negative and orphaned because their parents died of the disease, is an estimated total of 13.2 million.

Of that total 12.1 million are in our area.

The direct costs of AIDS will be felt through escalating employee benefit and medical scheme costs, as well as escalating rates of taxation

Metropolitan Life projects that the impact of HIV/AIDS will double employee benefits (direct) costs by 2005, and triple them by 2010. They also run a very accurately successful model indicating that life expectancy in South Africa by 2010 will fall to 37 years for females and 38 years for males.

If benefits are not reduced, the remuneration paid by firms could increase by about 15 percent and total indirect costs (e.g., turnover, recruitment, training, sick leave, productivity losses) will add a further 10 percent to the wage bill by 2005 and 15 percent by 2010.

The POLICY Project cites a 1997 study that projects that the cost of AIDS to the mining industry will increase from 114 million rand in 1995 to 1.5 billion rand in 2010.

Gold Fields Ltd., the world's third-largest gold producer, estimated--under a worst-case scenario--that by 2006, employees infected with AIDS would cost the company the equivalent of US$15 an ounce on its annual gold production of 4 million ounces

Cost of production will climb as labour cost escalates and productivity falls. A Harvard University survey projects that Durban companies may have to set aside as much as 7,5% of their annual payroll to fund losses incurred by AIDS infection.

Direct costs such as benefits packages, recruitment, training and HIV/AIDS programmes must be added to the indirect costs of absenteeism, morbidity on the job and management resources; and then combined with the systemic costs such as the loss of workplace cohesion and the effect on workforce performance and experience.

The aggregate impact of all costs is an increase in labour costs and decline in labour productivity, making it more expensive for a company to produce a given quantity of its product - impacting domestic price levels and international competitiveness of exports.

Annually for every 100 non-AIDS deaths, 88 highly skilled workers, 176 skilled workers and 308 semi- and unskilled workers will die as a result of AIDS

Metropolitan Life project that one in five South African workers could be infected with HIV/AIDS by 2005

An ING Barings report released in April 2000 concluded that AIDS will reduce South Africa's annual growth rate by 0.3 to 0.4 percent over the next 15 years.

The latest Intergovernmental Fiscal Review, says the epidemic has "substantially" increased demand for health care and has made the treatment of diseases like malaria and tuberculosis more expensive. It warns that the demands of the epidemic will crowd out spending that is needed on capital investment.

Deterrent to foreign investment and low investment = low growth

Consumer markets will suffer - by 2005, 4 million families with incomes of between R2 500 and R8 000/month will face a 20% reduction in discretionary spending as a result of higher taxation to fund State medical spending and increased personal medical costs.

Deterrent to long-term individual motivation - wealth creation, career, etc

Deterrent to personal savings accumulation compounds impact on investment

Impact on competitiveness of country, firms and individuals - loss of skills (sickness, death and emigration), quality, reliability of supply, etc

Impact on work ethic and motivation - absenteeism, motivation, etc

Impact of growth and supply of human capital for the future

- increasing number of orphans

- dislocated families

- interrupted and reduced levels of education

- breakdown in transfer of traditions, morals, ethics and values