The Economic Impact

Through its impacts on the labour force, households and enterprises, AIDS has played a more significant role in the reversal of human development than any other single factor.39 One aspect of this development reversal has been the damage that the epidemic has done to the economy, which, in turn, has made it more difficult for countries to respond to the crisis.

One way in which HIV and AIDS affect the economy is by reducing the labour supply through increased mortality and illness. Amongst those who are able to work, productivity is likely to decline as a result of HIV-related illness. Government income also declines, as tax revenues fall and governments are pressured to increase their spending to deal with the expanding HIV epidemic.

The abilities of African countries to diversify their industrial base, expand exports and attract foreign investment are integral to economic progress in the region. By making labour more expensive and reducing profits, AIDS limits the ability of African countries to attract industries that depend on low-cost labour and makes investments in African businesses less desirable. HIV and AIDS therefore threaten the foundations of economic development in Africa.

The impact that AIDS has had on the economies of African countries is difficult to measure. The economies of the worst affected countries were already struggling with development challenges, debt and declining trade before the epidemic started to affect the continent. AIDS has combined with these factors to further aggravate the situation. It is thought that the yearly impact of AIDS on sub-Saharan Africa’s gross domestic product (GDP) is a loss of 1%. While this is a relatively modest effect, it will build in significance over time, especially in countries where HIV prevalence is rising.

One way in which this impact can be reduced is through the provision of antiretroviral drugs to people living with HIV. A recent study in South Africa suggested that if ARV coverage expanded to reach 50% of those in need of the drugs then the effect of the epidemic on economic growth would be reduced by 17%.