The Impact of HIVAIDS on Businesses in Southern Africa

1
The Impact of HIV/AIDS on Businesses in Southern
Africa

• Center for International Health
• Boston University School of Public Health
• Sydney Rosen, MPA
• Jonathon Simon, ScD, MPH
• Donald M. Thea, MD, MSc
• William MacLeod, ScD
• Jeffrey R. Vincent, PhD
• with contributions by
• Eleanor Gouws, MPH, MSc, South African Medical
  Research Council
• Brian Williams, PhD, Council for Scientific and
  Industrial Research
• June 2001

2
Overview of Presentation

• Part 1 HIV/AIDS in Southern Africa
• Part 2 Approach and Methodology
• Part 3 Cost per Infection
• Part 4 Aggregate Costs
• Part 5 Conclusions

3
Part 1 HIV/AIDS in Southern Africa

• HIV prevalence among pregnant women
• HIV prevalence, incidence, and mortality among
  formally employed men

4
HIV Prevalence Among Pregnant Women
Source Whiteside and Sunter 2000, AIDS Analysis
Africa Apr/May 2001
5
Projected HIV Prevalence Among Formally Employed
Men
6
Projected HIV Incidence Among Formally Employed
Men
Males 35-49 lower job bands
7
Projected AIDS Mortality Among Formally Employed
Men
Males 35-49 lower job bands
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Part 2 Approach and Methodology

• Potential impacts of HIV/AIDS
• Timing of cases and costs
• Workforce stratification
• Companies in the study

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Costs to Firms of Workforce HIV/AIDS


Direct Costs
Indirect Costs

• Reduced On-the-Job Productivity
• Increased Absenteeism
• Supervisory Time

• Benefits Payments
• Recruitment and Training
• Overtime and Casual Wages

From an Individual Employee with HIV/AIDS





From High HIV/AIDS Rates in the Workforce and
Society

• Market Impacts on Insurance Premiums
• Market Impacts on Wage Rates
• HIV/AIDS Programs

• Management Burden
• Production Disruptions
• Loss of Workplace Cohesion
• Loss of Workforce Experience

Total Costs to Firms of Workforce-Related HIV/AIDS
Included in this study so far
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Chronology of Costs of HIV/AIDS in the Workforce
Progression of HIV/AIDS in the Workforce
Cost to Company
Timeline
Liability Acquired by Company
Employee becomes infected
No cost to company at this stage
Year 0
Discounted sum of all costs from years 0-10
Morbidity begins (some early mortality, some
long-term non-progressors)
Year 0-7
Morbidity-related costs are incurred (e.g.
absenteeism, productivity, management resources,
medical care insurance)
Year 7-10
Employee leaves workforce through death or
retirement (some long-term survivors)
Termination-related costs are incurred (e.g.
payouts from retirement fund, funeral expenses,
loss of morale, experience, cohesion)
Company hires replacement employee
Turnover costs are incurred (e.g. vacancy,
recruiting, training, reduced productivity)
Year 7-10
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Workforce Stratification
Population groups African (Black) White,
Asian, Coloured Sex and age Males lt35,
35-49, gt49 Females lt30, 30-44, gt44 Typical
job bands Contract and casual labor
Unskilled workers Artisans and technicians
Supervisors Managers
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Companies in the Study
Site
Sector
Workforce size
Status
Overall HIV prevalence
Location
A
Heavy industry
gt20,000
Completed
8.8 (1999)
SA national
B
Agriculture
5,000-10,000
Completed
22.9 (1999)
KwaZulu Natal
C
Mining (processing)
lt1,000
Completed
28.8 (2000)
Botswana
D
Mining (extraction)
1,000-5,000
Data collection underway
TBD (expected high)
SA national
E
Retail
lt1,000
Data analysis underway
7.9 (2001)
KwaZulu Natal
F
Media
1,000-5,000
Data collection underway
TBD (expected high)
SA national
G
Manufacturing
1,000-5,000
Planning
TBD (expected medium)
SA national
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Part 3Cost Per Infection

• Baseline financial assumptions
• Cost per new infection for companies A, B, and C
• Why are the companies costs so different?
• Distribution of the cost per infection

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Baseline Financial Assumptions

• Use companys own real discount rate
• (Company A 6, Company B 10, Company C
  4.5).
• Salaries, benefits, and other monetary values are
  held constant in real terms.
• No major market or price changes.
• Non-AIDS turnover has little effect on costs.

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Cost Per New HIV Infection, Males 35-49 (Present
Value)
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Cost Per Infection as a Multiple of Average
Salary, Males 35-49 (PV)
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Why Are the Companies Costs So Different?
Human Resource Policies
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Why Are the Companies Costs So Different?
Other Differences
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Distribution of the Costs of a New Infection
Technicians and artisans, males 35-49
?
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Part 4Aggregate Costs

• Aggregate cost of all new infections acquired in
  1999 or 2000
• Aggregate cost of new infections acquired each
  year, 2000-2010
• Cost of all prevalent infections in year cost is
  incurred
• Net present value of investments in prevention
• Net present value of investments in treatment

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Aggregate Cost of New HIV Infections Acquired in
1999 or 2000 (Present Value)
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Aggregate Cost of New HIV Infections Acquired Per
Year (Present Value)
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Aggregate Cost of Prevalent HIV Infections in
Year Cost Is Incurred
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Net Present Value of Investments in Prevention
For an STD-management intervention that
The NPV per infection averted per year is ()
The annual NPV of the intervention is ()

• Costs 230 per infection averted per year or
  3/employee/year.
• Reduces HIV incidence by 48 for each year the
  intervention is implemented.
• Has no other effects on workers behavior or
  population risks.
• Source Lesedi Project Steen et al. (1996),
  UNAIDS (2000).

Company B, males aged 35-49
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Net Present Value of Investments in Treatment
NPV Per Infection if Treatment Cost 600/Year

• Survival time without treatment 7 years.
• Treatment begins at year 6.
• Results shown are for males 35-49 for Company B
  and lt35 for Company C.

survival time from HIV infection to termination
from the workforce due to AIDS
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How Much Can Treatment Cost and Still Have a
Positive NPV?Company B, Males 35-49
Average Survival Time 12 Years (5 Additional)
To treat all HIV employees, NPV 0 at a
treatment cost of US 730/year.
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Part 5 Conclusions

• Summary of results
• The value of intervention
• Shifting the burden
• Where do we go from here?

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Summary of Results
Item
Company A
Company B
Company C
Present value per new HIV infection
Minimum of 4-6 times annual salary
Minimum of 1.3 times annual salary
Minimum of 4-6 times annual salary
At least 6.3 of salaries
At least 3.4 of salaries
Present value of new infections acquired in 1999
or 2000
At least 10.7 of salaries
Cost incurred in 2006 for all prevalent infections
About 8-9 of salaries
About 5 of salaries
About 18 of salaries
Treatment cost at which investment returns are gt 0
(TBD)
About 730/year
About 730/year
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The Value of Intervention

• For each new HIV infection a firms prevention
  efforts successfully avoid, the company saves the
  costs associated with that infection (less the
  cost of prevention efforts).
• Providing treatment and care to keep employees in
  the workforce might be less expensive than the
  costs of HIV/AIDS, even for low-cost companies
  (like Company B).
• There are many other harder-to-quantify benefits
  of investing in prevention and treatment,
  including retaining workforce experience,
  reducing impacts on morale and cohesion, and
  minimizing demands on management.
• HIV/AIDS prevention and treatment programmes are
  an investment in human resource development.
  They will have positive financial, social, and
  ethical returns for most companies.

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Shifting the Burden

• Company B probably represents a low-end estimate
  of the costs of workforce HIV/AIDS Company A and
  Company C are probably high-end.
• For any given HIV-positive employee, the
  financial cost to business varies widely between
  firms the economic cost to society varies much
  less.
• We believe that Company A will reduce its
  benefits, outsource unskilled tasks, and
  substitute capital for labor Company B has
  already done this to a large extent. (Company C
  is in a different labor market and its strategy
  is less predictable.)
• Businesses are systematically shifting the burden
  of HIV/AIDS to households, NGOs, and the public
  sector.

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Where Do We Go From Here?

• Urgently need information about the effectiveness
  of prevention and treatment interventions for
  Bang for Buck analysis.
• Monitor changes in regulatory policies and
  resource allocation strategies as governments
  eventually recognize and address the burden
  shift.
• Document the widely differing impacts from
  HIV/AIDS on different firms, even in the same
  country.
• Make the case for the business opportunity/
• responsibility to invest in the epidemic.

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Where Does the Business Community Go From Here?

• How will firms balance their social and fiduciary
  responsibilities?
• How will firms decide whether (and how) to
  provide treatment options for their labor force?
• How much will firms be willing to invest in the
  HIV/AIDS epidemic?