ECONOMIC HOLOCAUST

ECONOMIC HOLOCAUST

 

By: Berhanu Nega

 

                                                    

 

                         Introduction

 

                         The HIV/AIDS pandemic, which was considered to be the most serious health

                         hazard facing humanity this past century, is by now widely acknowledged to be

                         the most serious threat to the development efforts of developing countries. An

                         epidemic that supposedly started in the developed countries has quickly

                         become the "disease of the poor" aggravated by the limited financial capability

                         and institutional weaknesses of poor countries. Some of the benefits of

                         development that accrued to poor countries over the past half a century or so

                         are quickly eroded because of this scourge. The most affected, of course, are

                         countries in Sub-Saharan Africa. HIV/AIDS will have reduced life expectancy

                         in Africa by 2005 from 60 to 45 years wiping out the progress achieved in the

                         past three to four decades. Nine million African people have died of AIDS

                         since the epidemic started in the early 80s, 2.2 million in 1999 alone. Over 23

                         million Africans are currently living with HIV amounting to two thirds of the

                         world’s total. In sixteen African countries more than one in ten adults under 50

                         are infected. There are already 12 million African children that have lost their

                         mother or both parents. What is even more alarming is the rapid pace of its

                         spread. In 1999 alone there were four million new infections in Africa.

 

                         The crisis has affected all sectors of society. According to the International

                         Labor Organization, "AIDS threatens every man, woman and child in Africa

                         today. The pandemic is the most serious social, labor and humanitarian

                         challenge of our time." It has killed teachers, business managers, workers,

                         farmers, political leaders, and all kinds of professionals. Still, the amount of

                         effort put to fight this scourge is far from what is necessary to mitigate its

                         disastrous effects. While AIDS activists and some Non Governmental

                         Organizations have tried to increase awareness about the disease and even

                         taken positive measures at curbing its spread and caring for the afflicted, the

                         epidemic is not getting the full attention of stakeholders in society that it

                         certainly deserves. Only recently and largely prodded by international pressure,

                         African governments have started to make a concerted effort in fighting its

                         spread. The business community, save for some exceptions, has largely ignored

                         the problem as if it has no effect in its core activities. African businesses, as a

                         recent survey of the business community in the continent suggests, seem to be in

                         denial. On the other hand, it is becoming increasingly obvious that fighting and

                         eventually winning the epidemic requires the combined efforts of governments,

                         the business community, civil society institutions, NGOs and the community at

                         large.

 

                         Ethiopia is one of the highly affected countries in Africa. At 10.63% adult

                         HIV/AIDS prevalence rate, there are some three million people infected by the

                         virus at the end of 1999 claiming the lives of 280,000 people in 1999 alone.

                         That is an average of 767 people per day! In the number of infected people

                         and death rate, Ethiopia is second in Africa following South Africa. The

                         economic, social, and psychological effect of this epidemic is currently being felt

                         in all sectors of the society, and, without an immediate and concerted action by

                         every one, it could have a truly disastrous effect on our society in the future.

                         Despite such a high prevalence rate, however, the response of the various

                         sectors of the society is far from what is necessary to avoid the looming

                         disaster. This is particularly true to the Ethiopian business community who, if

                         initiated, has the wherewithal to contribute significantly towards the struggle

                         against this plague.

 

                         This short paper is designed to present the case for business involvement in the

                         fight against HIV/AIDS in Ethiopia. It tries to argue that businesses in Ethiopia

                         have the moral, social and economic responsibility to get involved in the fight

                         against HIV/AIDS in the country. It in particular tries to argue that the

                         long-term self-interest of business requires its involvement. It also tries to

                         identify specific activities that businesses could undertake to effectively

                         contribute towards this struggle. The next section presents an overview of the

                         social and demographic effects of HIV/AIDS in Ethiopia in comparison with a

                         few selected African countries. This is followed by a discussion on the macro

                         and micro economic effect of the epidemic in Ethiopia focusing on the potential

                         cost of the epidemic on business and its effect on the bottom line. The last

                         section presents the arguments for business involvement in the fight against

                         HIV/AIDS and suggests some of the modalities of its involvement.

 

                         II. The Social and Economic Effects of HIV/AIDS in Ethiopia

 

                    The social and economic impact of HIV/AIDS cannot be overstated. If unchecked, it

                    is an epidemic that can destroy a whole generation. It destroys the human capital of a

                    society that is desperately required for development. It weakens our social and

                    economic institutions. It could obliterate the family as an important institution as more

                    and more children become orphans. It has serious negative effect on economic

                    performance both by affecting the overall output of a country and by making the cost

                    of business prohibitively high.

 

                    Social and Demographic effects:

 

                    If we look at the global picture, there were some 33.4 million people estimated to be

                    infected by the virus at the end of 1998. Of this total number, 22.5 million (67.4%)

                    are in Sub-Saharan Africa, 6.7 million (20.1%) are in South and South East Asia, and

                    1.4 million (4.2%) in Latin America. The rest of the world combined accounts for only

                    2.8 million infected or about 8.4% of the total. If we look at the trend in new

                    infections, SSA’s picture looks very grim in deed. Of the 5.8 million people newly

                    infected through out the world in 1998, 4 million (69%) are in Africa. (See table 2 in

                    appendix)

 

                    As intimated earlier, Africa is the most affected continent in the world. Within Africa,

                    South Africa with 4.2 million affected leads the pack followed by Ethiopia with 3

                    million (of which 2.9 million are adults) and Nigeria is third with 2.7 million people

                    infected. (See table 1 in appendix). The number of children orphaned at age 14 or less

                    is highest for Uganda where the virus struck earlier with 1.7 million orphans followed

                    by Nigeria with 1.4 million and Ethiopia is third with 1.2 million orphans. However,

                    partly owing to the low level of income and the weakness of our health infrastructure,

                    the number of people dying from the disease is the highest in Ethiopia compared with

                    other African countries. In South Africa, where there are the highest number of people

                    infected, the death to infection ratio is about 6% (with an estimated 250,000 people

                    dead in 1999). In comparison, the ratio for Ethiopia is 9.33%, (which is more than

                    one and half times that of South Africa. The cumulative number of AIDS deaths in

                    Ethiopia since the epidemic struck in the early 80s is conservatively estimated at 1.2

                    million and expected to increase to 1.7 million by the year 2002. This is about 6.4%

                    of the total AIDS deaths in the world for a population a little less than 1% of the world

                    population. If present trends continue (i.e. using the low prevalence estimate of the

                    government) Between 2002 and 2014, an additional 3.35 million Ethiopians are

                    expected to die from the disease raising the cumulative number of people that will die

                    of AIDS to 5.25 million people by 2014.

 

                    One obvious implication of this is a significant decline in the life expectancy of the

                    average Ethiopian. The life expectancy at birth is currently estimated by the Central

                    Statistical Authority to be about 50 years without taking into account the effect of

                    HIV/AIDS. "However, due to the large number of infant, children and young adult

                    deaths due to AIDS, it may only be about 42 years." By the year 2014, the life

                    expectancy that would have been 56.4 years without AIDS is expected to reduce to

                    only 46.5 years owing to the HIV/AIDS pandemic. AIDS is also claiming the lives of

                    children at an alarming rate. The infant mortality rate, expected to decline from the

                    current 97 per 1000 live birth to 79 by the year 2014 without AIDS will increase to

                    85 because of it while child mortality rate will be 147 because of the disease from the

                    expected 127 without the disease. According to the Ethiopian Ministry of Health,

                    "AIDS could soon become the major cause of death for children under the age of five,

                    worse than other major causes such as diarrhea and respiratory diseases." The total

                    population of the country that could have been 92 million by 2014 will only be 85

                    million because of the disease.

 

                    The epidemic is having a strong and negative impact on the health sector of the

                    country particularly given the government’s weak financial capacity. According to a

                    study by Kello, the cost of hospital care for an AIDS patient ranges from birr 425 to

                    3140 for an average of birr 1800. The total cost of caring for AIDS patients,

                    according to government estimates is about 87 million birr in 2000 expected to rise to

                    185 million by the year 2014. According to UNAIDS, if Ethiopia is to adequately

                    care for all the AIDS patients the required health expenditure will rise by 74 to 121

                    million USD. This is an additional 3 to 5 dollars in per capita income that the country

                    does not have and need to get from foreign sources. Currently, as much as 42% of all

                    the country’s hospital beds are occupied by AIDS patients and this is expected to rise

                    to 54% by the year 2004 leaving only 46 % of the beds for all other afflictions in the

                    country. Given the wide spread occurrence of other epidemics such as malaria in the

                    country and the miserable condition of the country’s health sector, it is not difficult to

                    imagine the potential increase in mortality caused by other diseases because of the

                    suffocation of the health care system by the HIV/AIDS epidemic.

 

                    The epidemic also affects the education sector. It does so by, among other things, the

                    increase in the number of teachers that die of the disease and/or by the rate of

                    absenteeism of infected teachers. A rough estimate of the size of this is given by the

                    percentage of primary students that have lost a teacher because of AIDS. As can be

                    seen from table 1, the highest rate (3.9%) is in Botswana mainly because of the high

                    adult prevalence rate (35.8%) followed by Kenya and Uganda at about (1.6%) where

                    the epidemic started earlier than Ethiopia. The rate for Ethiopia is a significant 1.17-%.

                    That is 51,000 primary school pupils out of 4.3 million that have lost teachers for

                    AIDS in 1999. For a country that has a serious shortage of trained and experienced

                    teachers, it will neither be easy nor cheap to replace these teachers.

 

                    The Economic Impact of HIV/AIDS

 

                    As suggested earlier, HIV/AIDS is no more just a health and humanitarian crisis. It

                    has become a monumental development problem through its negative effects on a

                    country’s economy. There are various ways through which it affects the economic

                    performance of a country. At the macroeconomic level, it reduces total output and is

                    potentially inflationary. It negatively affects government budget by increasing its

                    expenditure for healthcare and reducing revenues owing to the reduction in output.

                    The foreign exchange position of the country is also affected because of the high forex

                    demand to purchase medicine and related products. The increased AIDS related

                    expenditure also reduces national savings and thus investment. At the firm level, the

                    epidemic could affect business by increasing the cost of doing business through

                    increased labor costs, loss of trained human manpower, reduced productivity and

                    absenteeism. It also affect business on the demand side by reducing the demand for

                    goods and services that they produce owing to the overall decline in output and

                    expenditure shifting as household expenditure for health care and funerals increase at

                    the expense of other spending.

 

                    UNAIDS projections show that the per capita income growth of Ethiopia will be

                    reduced by 0.6% by the year 2010, which is the lowest by comparison with the

                    selected African countries reported in table 1 and much lower than the average SSA

                    country in general. Still, this is a significant loss for Ethiopia. According to our simple

                    projection, (see tables 3 in the appendix) this amounts to a loss of 60 birr in per capita

                    income by the year 2010 amounting to over 4.8 billion birr in total income. It is

                    expected that Ethiopia will lose 8.3% of its potential workforce in 2005 and 10.5% in

                    2020. The loss of workforce could reach 2.45 million if we take the government’s

                    conservative projections or could rise as high as 2.7 million if we use UNAIDS’

                    prevalence rate as a base. With a mean expenditure for treatment of birr 1930 and

                    funeral expenses of birr 327, (several times more than the average income of most

                    households) it is not difficult to imagine the reduced national savings owing to AIDS.

                    This would certainly lead to a reduced investment thus reducing economic growth. In

                    terms of foreign exchange allocation, if the country spends the required amount of

                    money to import drugs to treat all AIDS patients; it could spend from 7 to 37 weeks

                    worth of all its forex quota in 1994. This is a foreign exchange that the country could ill

                    afford.

 

                    Although there is no detailed data for Ethiopia, the disease affects areas critical to our

                    economy its potential for development. According to recent surveys of some African

                    countries, thirty percent of Malawi and Zambian teachers are infected for example and

                    in many African countries the disease hit professionals hard. A 1997 study in Rwanda

                    showed that "the likelihood of HIV infection for a pregnant woman to be 38 percent if

                    her husband worked for government, 32 percent if he was a white-collar worker, 22

                    percent if he was in the army and 9 percent if he was a farmer." As in other African

                    countries, AIDS affects the various sectors of the Ethiopian economy differently.

                    According to a 1994 survey, the mean number of hours spent per week in agriculture

                    per household was found to be 33.6 hours in non-AIDS afflicted households, as

                    compared with between 11.6 and 16.4 hours in those that were afflicted. The urban

                    economy is the most affected currently owing to the high prevalence rate in urban

                    areas (13.4% for urban areas in general and 16.8% for Addis Ababa) compared with

                    rural areas (with 5% adult prevalence rate). Within the urban economy, following the

                    transportation sector (because of mobility) and the insurance sector, the industrial and

                    services sector will be highly affected.

 

                    The effect on Business

 

                    In today’s very tight competitive environment, businesses need to do whatever they

                    can to reduce cost to stay competitive. They certainly have to avoid any thing that

                    could potentially raise their cost. From the experience of many African countries, it

                    has been shown that the epidemic can seriously raise the cost of businesses directly.

                    One such direct effect is the loss of skilled and experienced workers including senior

                    staff which, both reduces productivity and increase the cost of training new recruits.

                    Productivity of enterprises is also affected by absenteeism owing to illness or attending

                    funerals of relatives or fellow workers. In a 1994 survey of 15 firms in Ethiopia, AIDS

                    accounts for 53% of all incidences of illness over a five-year period. According to the

                    Ethiopian Ministry of Health, "the number of workdays lost to illness for a person with

                    HIV/AIDS can range from as little as 30 to as many as 240 days in a year." UNAIDS

                    estimates that HIV will result in a fall of productivity to reach as high as 50% in the

                    next five to ten years. Another direct cost to business is the cost of health care. In

                    Zimbabwe, for instance, insurance premiums generally doubled between 1996 and

                    1998 while a flower company in Kenya reported that its health care costs rose ten

                    times between 1985 and 1995. The costs of HIV to 5 firms in Botswana is estimated

                    to rise 7 times between 1996 and 2004 to equal 5% of the total wage bill. An average

                    Zimbabwean worker spends ten percent of his working time for funeral. All this adds

                    significantly to the cost of the business firm negatively affecting its competitiveness.

 

                    Business bottom line is affected not only on the cost side. Its profits also suffer for

                    lack of demand for their products. Demand is affected both by reduced income of

                    households and because of expenditure switching. The reduced income of households

                    can be captured at the macrolevel by the decline in GDP owing to the epidemic. As

                    stated earlier, the total income loss assuming a 0.6% percapita GDP growth

                    reduction, could be close to 5 billion birr per year in 2010. In terms of expenditure

                    shifting, the loss of demand for Ethiopian businesses (other than those related to

                    healthcare and funerals) is estimated at about 4.1 billion birr for medical care and

                    688.5 million birr for funerals over the next ten years. This comes to an annual average

                    cost of health care and funerals of over 475 million birr. According to one study, the

                    expenditure on normal goods and services of households in which someone is

                    suffering from AIDS is often halved. As a Thai businessman succinctly put it "dead

                    customers don’t buy."

 

                    All these combined could reduce the profitability of business significantly. Although

                    there is no such calculation for Ethiopia, if we take the experience of other African

                    countries, the loss in profitability could range from as little as 0.5% in the less affected

                    industries such as textiles to as high as 15% in the highest affected transportation

                    sector. (See graph in appendix).

 

                    Business Response to HIV/AIDS

 

                    Albeit scanty, the above evidence clearly indicate that businesses in Ethiopia, like all

                    businesses in most affected countries in Africa, have a clear business interest to be

                    engaged in the fight against HIV/AIDS. Although many businesses do not see the

                    direct effect of the disease now, if current trends continue or get worse for lack of a

                    concerted action, their bottom line is sure to seriously suffer in due time. As the

                    competition gets stiff and the global economy gets more and more knowledge

                    intensive, no country or business can afford to lose its professionals, teachers,

                    managers or other skilled personnel at such a high rate and hope to survive let alone

                    emerge victorious. Therefore, for the Ethiopian business community self-interest alone

                    demands, even requires its constructive engagement.

 

                    However, the self-interest of business in general is not measured only by the

                    short-term cost benefit calculus of the individual firm. The overall socio-economic

                    environment on which business activity is conducted has a crucial bearing on its

                    profitability or even survival. One such environment that is seriously threatened by the

                    HIV/AIDS pandemic is social stability. The tremendous burden put to bear on the

                    country’s health care system, the massive number of AIDS orphans that are sure to be

                    added to the army of street children in our cities, the decline in our education partly

                    owing to the loss of many experienced teachers, the erosion of our value system as a

                    result of the obliteration of families, the weakening of our defense forces because of

                    the high prevalence of the disease in the military, added to the overall economic

                    decline expected to come as the disease takes its toll all add up to erode the social

                    fabric that has woven us together as a community. This atmosphere could seriously

                    threaten our social and political stability that is so necessary for business to flourish.

 

                    But, that is not the only reason why businesses have to be involved. There is

                    compelling moral and citizenship reasons that justify business involvement. After all,

                    business owners and managers are human beings endowed with feelings and concerns

                    for their fellow humans. Any natural disaster that strikes human beings anywhere must

                    surely engender their sympathy and provoke action. That is why, although the size and

                    modality of the responses differ, all of us (irrespective of our religious or nationality

                    differences) feel the pain of a natural calamity that befalls humans anywhere. It is the

                    inherent moral obligation of our existence that triggers such sympathy. It is also to this

                    universal moral obligation that we appeal when we ask the support of other

                    well-endowed countries during natural disasters in our own country or the indignation

                    we feel when such support is denied for political or other reasons.

 

                    This moral obligation is even more compounded when the calamity occurs in ones

                    own country. Here the universal moral requirement becomes even more forceful

                    because of the sense of community one shares as a citizen of a country. Being a citizen

                    of a country bestows on the individual certain privileges and responsibilities that

                    non-citizens do not have. The right to freely trade in ones country comes with the

                    responsibility to pay taxes and to play by the established rules of the game. The right

                    to choose our leaders or aspire to any public office within our country comes with the

                    obligation to use our votes properly as voters or commit our selves to genuine public

                    service if elected. The strong case for a free market system is made on the basis of the

                    wider benefits it accrues to the larger community. It is therefore legitimate to expect

                    businesses to give back to the community in times of hardship some of the excess

                    resources they are privileged to accumulate in good times.

 

                    If the above argument is somewhat valid, the question to address then is why the

                    business community fails to get actively involved in the fight against AIDS. There are

                    two plausible, albeit not justifiable, reasons for that. The first reason is directly related

                    to the epidemic itself. Most business leaders do not seem to have realized the

                    magnitude of the problem and its potential consequences. This is true not only to

                    Ethiopian business but also businesses in other parts of Africa. According to a survey

                    compiled for the Africa Competitiveness Report 2000, in a "comparison between

                    perception of business and the best scientific estimates of infection rates and AIDS

                    deaths, business leaders tend to perceive HIV infection levels to be lower than those

                    recorded by UNAIDS...The average ACR figure (calculated as a population

                    weighted average for the 29 countries where UNAIDS data are available) is 4.26

                    percent against a UNAIDS average of 6.16 percent." This is a sizeable difference

                    especially when considering the fact that the survey was done in 1999 while UNAIDS

                    estimate was for 1997. This gap between scientific estimates and business perception

                    is even wider for Ethiopia. As can be seen from table 4 in the appendix, UNAIDS

                    adult prevalence rate estimates of 9.31% and 10.63% for 1997 and 2000, is more

                    than three times the 3.02% business leaders estimate to prevail in the work force. One

                    reason for this divergence could be a difference in the prevalence rate of adults in the

                    general population and that of the work force. However, according to the ACR

                    analysis, "there is also evidence to support the view that these ACR figures reflect a

                    degree of denial" among the business community. This is partly an indication that "the

                    full fury of the epidemic has yet to be felt and that business leaders are unaware of

                    this." If the latter has some truth, one of the important tasks of those already involved

                    in the fight against HIV/AIDS is to double their efforts to raise the awareness of the

                    business community on the current status and future implications of the epidemic.

 

                    In the Ethiopian case, there is also a more general problem that afflicts the business

                    community when it comes to active participation in the affairs of the larger community

                    namely apathy. Save for issues that narrowly concerns their own businesses directly or

                    in exceptional cases where the country’s sovereignty is threatened by outside forces,

                    the Ethiopian business community is very shy in making its presence felt in the broader

                    concerns of the society. This is true both in areas it considers political (peace and

                    stability, democratization...etc.) and activities that it presumes are relegated to the

                    state (cleaning streets or neighborhoods for example). This is a trend that damages the

                    credibility and respectability of business in the society. On the other hand, this is a

                    trend that hurts society by robbing it of the skill and resources that the business

                    community posses and that the community can use for the overall advancement of

                    society.

 

                    Areas for effective business participation

 

                    If the case for the involvement of the business community is plausible, the next step is

                    to identify the modality of its participation. Clearly, the responsibility to contribute

                    towards the struggle against this epidemic should be equally shared by all members of

                    the society. Effective struggle requires identifying the comparative advantage of each

                    sector of the community for optimal use of the available resources. In general, it is fair

                    to say that businesses are well placed to join the fight against AIDS either by

                    themselves or in cooperation with the public sector and/or with non-governmental

                    agencies active in the fight against AIDS.

 

                    In this regard, at least four areas can be identified for business participation in the

                    prevention of the spread of the epidemic and in contributing to the care of the already

                    afflicted on the basis of the successes registered in other countries. These are:

 

                    1. Since heterosexual intercourse is known to be the main transmission mechanism of

                    the HIV virus in Ethiopia and condoms are known to be at the heart of an effective

                    prevention strategy, businesses can use their experience in promoting their products

                    by introducing innovative marketing tools for the promotion and marketing of

                    condoms and other mechanisms of safe sex.

 

                    2. Business marketing skills can also be used in identifying tools for targeting highly

                    affected groups in the community such as the youth.

 

                    3. Businesses can take a number of work place actions to safeguard their own

                    employees from the disease and contribute to the care of affected workers. This could

                    be done through work place preventive educational programs and instituting strong

                    measures against stigmatization of affected workers.

 

                    4. Businesses can also use their tremendous financial resources and extensive contacts

                    in government to lobby for an effective AIDS policy in the country and participate in

                    mobilizing the larger community for preventive action, contributing towards the care of

                    orphans and the loving care of those afflicted by the disease.

 

                    Conclusion

 

                    Without a doubt, HIV/AIDS is one of the most serious humanitarian and

                    developmental challenges facing the country today. By the total number of infected

                    persons, Ethiopia is only second to South Africa in the African continent, which is by

                    far the worst affected region in the world. There is no person in the country that is not

                    affected by the scourge in one form or another. The disease has killed many times

                    more compatriots than all the wars this country has fought against foreign aggression in

                    this century combined. The struggle against this epidemic requires the combined

                    efforts of the government, non-governmental organizations, professional associations,

                    the donor community, and all citizens of this country. Businesses in particular have

                    both the self-interest and moral duty to contribute to the struggle against this epidemic.

                    They also have the skills and the means to make an effective and durable contribution.

                    HIV/AIDS is not a mysterious punishment that is handed down by some super natural

                    force. Its causes are known and, although the cure is not yet available, there is

                    sufficient and widespread knowledge about the actions that need to be taken to

                    prevent its transmission. Neither is it a problem that goes away if ignored. It needs

                    concerted action to mitigate its disastrous effects. It is high time that the Ethiopian

                    business community wakes up from its slumber and proves that it is a good citizen of

                    this community by making its human and material resources available to fight this

                    scourge of the century.