Ipyet/HIV/AIDS and Enterprise Sustainability

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Module 4.1: HIV/AIDS and Sustainability of Youth Enterprises

A discussion paper by
Victor P. K. Mensah

Welcome to Module 4.1 HIV/AIDS and Business Sustainability. In Southern Africa, life expectancy at birth climbed from 44 in the early 1950s to 59 in the early 1990s. With the demographic impact of AIDS, this dropped to 45 sometime between 2005 and 2010. The impact caused by AIDS has reverberated through every sector of the society, from health, to agriculture, education and the private sector, and is draining economies of the vital resources and contributions of a whole generation. The impacts felt at both the macro and micro levels of economies dictate that businesses, no matter how small, need to THINK and ACT as quickly as practicable in responding to the challenges posse. This discussion paper will introduce the issues attendant on this and encourage further thinking and discussions towards encouraging incorporation of programming to address HIV/AIDS in businesses and entrepreneurship training.

Course Objectives

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By the end of this course, participants will be able to:
  1. List at least three macro and micro economic impacts of HIV/AIDS on businesses
  2. understand reasons why businesses design interventions to respond to HIV/AIDS
  3. List at least three possible intervention strategies for youth enterprises in responding to HIV/AIDS.

Introduction - The Health of a Business

For many business analysts, economists, and managers, a business is healthy when one or more several conditions exist: the business must have clear signs of profitability and symptoms of a going concern. Obviously, the business must be of relevance (in demand terms) to the people in the vicinity of the enterprise and to the staff and members of the business itself. This creates a symbiotic relationship between the business enterprise and all these variables (stakeholders) – staff, members (or stake/shareholders), and members of the business’ environment (clients, and suppliers). Through this intricate web of relations, many things/issues affecting these players in the environment of the business directly or indirectly affect the business itself. These issues include health. In other words, the health of a business is the health of its environment (stakeholders).

In this module we will explore some of the health issues that affect businesses. We will discuss why these issues affect businesses; to what extent they affect businesses; what intervention can and have been taken to address these impacts; what lessons have been learnt and can be deduced from these intervention strategies; and what innovative ways can further be explored especially by youth entrepreneurs and youth entrepreneurship development actors.

Background: History of HIV/AIDS

As the name of this sub-module indicates, we will focus more closely on one health issue – HIV/AIDS - which has caused havoc to many especially in the developing world. A healthy employee is always more productive than one who is unwell. Health benefits and insurance, lost hours and days of work, reduction in productivity, increased exposure to other risk and work-place safety issues, and the probability of having a spiral effect (epidemic, effect on products being manufactured especially in the food and beverage industry) among other issues negatively affect the bottom line of businesses. While illness cannot generally be realized or factored or projected into planning, most illnesses can be avoided with marked benefits.

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What do you know as the history of HIV/AIDS?

HIV/AIDS and Business

Contact-new.svg GLOSSARY OF TERMS
Absenteeism: unplanned/unauthorised absences from work by employees

Capital: physical (e.g. factories) and human (e.g. training) contributions to productive activity
Macroeconomic: combined/aggregate economic activity
Morbidity: incidence of a disease in a specific locality
Mortality: the number of deaths in a given period
Production Costs: the price (finance and time) of creating or manufacturing goods and services
Production Cycle: the process (inputs and outputs) of production of goods and services
Productivity: the amount of output per unit of input (labour, equipment and capital)

Supply Chain: provision of raw materials and manufactured goods to point of sale, including production, assembly and delivery

UNAIDS estimated that 38.6 million [33.4 million–46.0 million] people worldwide were living with HIV in 2005. An estimated 4.1 million [3.4 million–6.2 million] became newly infected with HIV and an estimated 2.8 million [2.4 million–3.3 million] lost their lives to AIDS. According to the International Crisis Group (ICG 2001), where the epidemic has hit hardest, Sub-Saharan Africa, experts believe AIDS will eventually kill one in four adults. Seven countries already have adult prevalence rates above 20 per cent of the population. “Yet this pandemic may only be at its beginning. Infection rates are still rising in most African nations, and the strongest effects are only now beginning to be felt. Elsewhere, infection rates are rising at steep rates, in patterns disturbingly similar to those observed in Sub-Saharan Africa five to ten years ago. HIV infections are believed to be doubling every year in Russia and increasing rapidly across the Commonwealth of Independent States, India, China and Southeast Asia. For a growing number of states, AIDS can no longer be understood or responded to as primarily a public health crisis”. HIV/AIDS has become a threat to every aspect of life as we know it.

With all information available about this pandemic,one would think we all at the same level however many people especially from rural areas still lack information about HIV/AIDS particurlarly on its transmission.This escalates its spread despite all the major being taken to reduce its spread. There are some Priests who claim to cure the virus and who recommend members of their churches to stop taking ARVs so that they can pray for them and get cured. Others believe that HIV is caused by contraceptives.

Effects on Businesses

The impact of the HIV/AIDS epidemic goes far beyond the household level. Firms and businesses may also be affected as HIV-infected people are usually in the prime working years and are involved in the process of production . The resultant impacts on these businesses are multiple-fold. The impacts can be directly on the firm or indirect. Impacts can also vary as on small businesses and large firms. According to UNAIDS (2000), there could be potential Macroeconomic impacts as well as micro-economic impacts (at the level of individual firms). To understand the full nature of the impacts on businesses and the general economy however, we must appreciate some of the terminologies often used in literature analyzing this situation (refer to the glossary box).

Impacts on macroeconomic indicators include the fact that the disease affects mainly people in the most productive age brackets in the country. These are usually 30 years and below. They are youth. There are attendant reduced earning, lower savings and disposable income, higher demand for care, higher expenditure on healthcare, deepening issues of social and economic dependency, and premature death. The result is that, there is reduced demand for some economic goods and services and a marked reduction in market sizes for industries. Some estimates by the World Bank suggest that the macroeconomic impact of HIV/AIDS may be significant enough to reduce the growth of national income by up to a third in countries with adult prevalence rates of 10 percent.

“Businesses do not work in isolation and so the impact of HIV/AIDS on all productive sectors, on the business supply chains, the effective labour supply and intellectual capital directly impacts on individual companies. These impacts can significantly affect the ability of business to operate. This may lead to a reduction in foreign direct investment, discouraged by these potential production deficiencies exacerbated by HIV/AIDS. There is a danger at a national level of governments, fearful of a possible negative business response to their experience of the epidemic, maintaining a policy of denial” - Daly K. (2000).

According to the USAID Africa Bureau (2002), there could be great economic impact on both investments and trade.

Impact on Investment

  • Uncertainty over the impact of HIV/AIDS causes investor reluctance
  • Decrease in the pool of national entrepreneurs
  • General economic picture

Impact on Trade

  • Reduced production due to increased costs to firms
  • Decrease in workers with experience in export markets
  • Transport of export products to marketplace

Impact at Micro-Economic Level

At the micro-economic level (individual small business level), the impact in generally two-fold. There is marked reduction in productivity, and an increase in the cost of operations. This is illustrated below:

<<insert Fig 1: Impacts of HIV/AIDS on a Company. Source: Daly K. (2000)??

Declining productivity results in declining profits and inability to meet demands from customers. This is caused mainly by increase in absenteeism as a consequence of employees becoming ill due to HIV/AIDS and attendant opportunistic illnesses, the need to attend related funerals, and caring for ill relatives and friends. Production cycles are disrupted, more use of temporary staff, and underutilization of factors of production. According to Whiteside (1999) absenteeism due to HIV/AIDS may account for between 25-54 percent of operation costs in Eastern Africa. Further, productivity is lost through greater and more impactful organisational disruption. Increased rates of morbidity results in increased staff turnover, loss of tacit knowledge, loss of skills, and loss of morale.

Increased operational costs are experienced by the businesses through increased health management costs, increased costs of funerals of staff members and related dependents, increased insurance cover (especially life insurance premiums) and pensions, and a marked increase in costs of recruitment and training.

For example, in Zimbabwe, over a two-year period, life insurance premiums quadrupled as a result of HIV/AIDS, while Barclays Bank in Zambia experienced a rate of AIDS-related deaths of 36 out of 1600 employees, a rate ten times the death rate in most US companies - Loewenson, R (1999). These increasing costs may eventually affect the level of benefits that a business is able to provide for its workforce.

"…Knowledge or even suspicion that one of their colleagues has HIV/AIDS is likely to trigger certain negative attitudes and behavioural responses towards that individual and how they perform their own tasks." Ching'ambo et. al (1995)"

Most African businesses that have more than 10 employees have already seen at least one employee die of HIV/AIDS or currently employ infected workers. In some countries, the number of HIV infected employees has been devastating. For example:

  • In a sugar mill in South Africa, 26 percent of all tested workers were infected with HIV. Infected workers incurred, on average, 55 additional days of sick leave during the last two years of their life.
  • In Botswana, it has been estimated that 35 to 40 percent of all teachers are infected with HIV .
  • One study in Kenya on a sugar estate found that 25 percent of the estate's workforce was infected with HIV .
  • Even in countries such as Ghana, which has a more moderate prevalence of HIV, businesses report significant numbers of both AIDS deaths and known HIV infections

Business Responses

Now more than ever, businesses stand at the front lines to assist in the fight and decrease the prevalence and impact of HIV/AIDS on a global and national level. Direct and indirect impacts in the workplace, which include increased costs and overall threats to the foundation, can pose devastating effects to the employee and employer . The impacts on businesses, especially small businesses like youth enterprises, are dependent on firstly, the policies in place and the general outlook of the business to such issues, as well as management leadership exhibited by the youth entrepreneur. Policies such as the level of HIV/AIDS awareness of the entrepreneurs and her/his staff and the programmes put in place to ensure that preventive actions are taken alongside care and maintenance of members of staff living with HIV/AIDS go a long way in reducing the overall impact on the business. Leadership by the youth entrepreneurs themselves, in the form of self-discipline, promoting professionalism in the workplace, and avoiding stigmatisation and abuse of other members of staff who have the disease will be helpful.

In the eventual analysis, timing also matters. Specific responses/interventions could be incorporated into the management of youth enterprises or no interventions at all can be taken. If interventions are going to be taken by these entrepreneurs, will it be a late response or an early one. The figure below shows conceptual costs related to the timing of responses/interventions.