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Barclays report reveals cost of HIV/AIDS to Africa

  • In South Africa the impact of the epidemic could reduce GDP growth by 1.5 per cent a year
  • Overall annual AIDS-related healthcare expenditure in SA trebles to £1.5bn a year by 2020
  • Larger companies provide efficient policies but smaller enterprises lag behind
Barclays published today an economic analysis looking at the economic cost of the HIV/AIDS pandemic and the effect it will have in the near future on African countries and the development of their markets and infrastructures. The study, titled “The Impact of HIV/AIDS on African Economies”, has been compiled by economists at Absa, Barclays South African subsidiary. It confirms that the impact in the hardest-hit countries of southern Africa is already serious and forecast to deepen over the coming decades. For developing countries, balanced and sustainable economic growth in the long term depends on, among other factors, attracting more foreign investment to help their economies grow and enable the creation of more mature and structured markets. Barclays, which operates in 12 countries in sub-Saharan Africa, hopes the report will stimulate debate among large international corporates on what they can do to mitigate the continuing HIV/AIDS pandemic. To encourage discussion and to mark World AIDS Day 2006, Barclays and UNICEF are jointly hosting “Business for Africa – Fighting the economic threat of AIDS”, a discussion forum to look at how leading international businesses with a presence on the African continent can contribute to winning the fight against AIDS.  Opening the forum, Gary Hoffman, Barclays Group Vice Chairman, commented: “Barclays is one of the biggest investors in Africa. Our approach is that investing in developing markets means working to help those markets develop. We are delighted to host this discussion jointly with UNICEF today and we welcome the opportunity to hear other companies’ comments and experiences.” David Bull, Executive Director of UNICEF UK, said: “It is encouraging that global businesses are waking up to both the risks of HIV and AIDS on the economies in which they operate and their responsibilities in terms of their staff and wider community. UNICEF’s business is children.  We believe that companies along with governments and civil society play a vital role in the global response to the pandemic. For UNICEF they are essential partners in our global campaign to create a world free of AIDS – for this generation and tomorrow’s.” Today’s research focuses largely on data for South Africa, as these are more easily available and can be effectively used to forecast trends across the sub-Saharan region. The study reveals how the pandemic could reduce GDP growth in South Africa by up to 1.5 per cent a year unless a cure is found or there is a dramatic change in sexual behaviour. With South Africa accounting for up to 40 per cent of sub-Saharan Africa’s economic activity, this is a more severe impact than many analysts are willing to admit.  Contrary to popular belief, the HIV/AIDS pandemic could have also an adverse effect on both the income per capita and the unemployment rate. Not only will the overall economic environment suffer from this lower growth but healthcare expenditure is expected to continue to grow. Projections show that AIDS-related spending will treble by 2020 rising to about £1.55bn (Rand 21.5bn) a year from £0.53bn (Rand 7.3bn) in 2005. The projected increases get steeper as years pass and are expected to break the £1billion barrier in 2010, reaching £1.46bn (Rand 20.3bn) in 2015. Comparing hypothetical scenarios, with and without antiretroviral treatment (ART) costs, shows that providing ART doubles projected expenditure. Fundamental HIV/AIDS programmes therefore require significant funding in an already challenging economic environment. To achieve successful and sustainable business in Africa, organisations must develop and display awareness that they have an important role in the fight against HIV/AIDS. Large international businesses have so far achieved greater results in implementing HIV/AIDS policies than small- and medium-size enterprises. Recent research has shown that more than 90 per cent of large companies (those with over 500 employees) have an HIV/AIDS policy, whereas among smaller companies with less than 100 employees only 13 per cent have implemented an HIV/AIDS policy.  Barclays believes this presents a sizeable hurdle in fighting the economic consequences of HIV/AIDS, since the majority of workers in Africa are employed by SMEs.