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The Impact Of Aids On Economics

AIDS epidemic.

In South Africa an estimated 5.4 million people live with AIDS in the 2006, or approximately 11% of the total population.1 The disease affects the economically active population the most as indicated by an estimate of 18.34% of people aged 15 – 49, being HIV positive, published by the Department of Health in 2007.

This disease will impact a number of social and economic variables:
· Lower GDP. Arndt and Lewis (2000) estimate a 17% difference by 2010.2 This is due to lower productivity of labour on the account of AIDS: absenteeism will rise. And the reduction in the labour supply to businesses. Also govement spending will move to AIDS related spending like Health care away from investment.
· Lower disposable income. Households will spend more on healthcare and nutrition to care for AIDS infected members. This will leave less income to spend on luxuries and services. Demand for products and services deemed “non-essential” will lower.
· Higher cost of labour. Staff living with AIDS will be more absent. Staff turnover will increase as a result of AIDS deaths. This will increase the cost of recruitment and training. The loss of skills will also carry a cost, as these will become harder to replace.
· Decline in savings. As household income shifts to essential items and health care, less income will be available for saving. This will put pressure on a bank’s margins as the cost of alternative funds (SARB) for lending purposes will be higher.

Skills shortage.

Education levels in post-apartheid South Africa are on the increase: The proportion of South African adults with a matric has increased from 25% in 1996 to 35% in 2006, more than 1.1 million South Africans (3.67%) have a degree or better.3 Despite this improvement in education unemployment is rising under educated South Africans: matric-level unemployment rates have increased from 25% to 40% since 1995 and tertiary-level unemployment rates from 6% to 15%.4 This is due to a number of...