Select Committee on International Development Third Report

Section 2 — The Impact of HIV/AIDS


66. The economic impact of HIV/AIDS will be felt not only at the level of factory and company but at the macroeconomic level. Evidence suggested, however, that it was particularly difficult to assess the impact of HIV/AIDS was having since "Many factors apart from AIDS affect economic performance and complicate the task of economic forecasting — drought, internal and external conflict, corruption, economic mismanagement. Moreover, economies tend to react more dramatically to economic restructuring measures, a sudden fuel shortage, or an unexpected change of government, than to long, slow corrosions such as those wrought by AIDS".[68]

67. There are, however, good prima facie reasons to believe that there will be a macroeconomic impact from the epidemic. As funds are diverted to the care of the ill, and then to survival with the loss of wage-earners, the amount of disposable income and domestic savings will fall. This has an effect on the amount of money going into investment for production.[69] There is also an impact through the loss of skilled workers, "creating major bottle-necks in business and production. This is especially worrying since ... HIV is also undermining education and hence the potential to expand skills as quickly as they are needed".[70] A third aspect to the macroeconomic impact is the combination of a need for increased government expenditure, particularly in the health sector, with a declining tax revenue as the economy is smaller than it would otherwise have been.

68. A memorandum from three academics from the University of Sheffield, Simon Dixon, Scott Mc Donald and Jennifer Roberts, summarises their preliminary investigation of the impact of HIV/AIDS on economic growth. Their results provided "empirical support for the arguments that HIV/AIDS is having an impact upon macroeconomic performance in developing countries".[71] In particular, econometric estimates indicated that "life expectancy, the proxy for health capital, has had a substantial and significant positive impact on the growth of GDP per capita".[72] Thus the decline in life expectancy as a result of HIV/AIDS is expected to affect GDP per capita.

69. The World Bank as well as other researchers have conducted studies of the likely impact of the epidemic on growth. UNAIDS summarises these findings, "African countries where less than 5 per cent of the adult population is infected will experience a modest impact on GDP growth rate. As the HIV prevalence rate rises to 20 per cent or more (as it already has in a number of countries in southern Africa), GDP growth may decline up to 2 per cent a year".[73] ING Barings Bank estimate for South Africa that the overall growth rate over the next decade is likely to be 0.3 to 0.4 percentage points lower every year than it would have been without AIDS".[74] The cumulative effect of such slower growth is estimated in another study as resulting in GDP in South Africa in 2010 17 per cent lower than it would have been without AIDS.[75]

70. We must consider whether donors and national governments are yet considering in enough detail the macroeconomic effects of the epidemic and taking account of them in their planning. All development works on certain assumptions as to future resources available. It is clear that development planning must count on there being less government revenue, fewer savings and disposable income, a smaller market for goods and services in the country, a decline in productivity. The more accurate the information the better, obviously. Evidence suggested that more research was needed in this area. The evidence from Dixon, McDonald and Roberts states that "Further research should be directed at providing a greater understanding of the mechanisms through which health, and particularly HIV/AIDS, impacts on national economies. This research should recognise the differential sectoral impact of the disease and provide a greater understanding of the mechanisms by which sustained epidemics impact upon economic performance".[76] DFID informed us that "The World Bank and others are continuing to study economic impact, at both the micro and macro levels. National governments, backed by DFID and other bilateral and multilateral development agencies, need to keep in touch with this research and take it into account in their national planning and development strategies".[77]

71. Work has only just begun on the macroeconomic impact of HIV/AIDS and yet the significance for national governments' forward planning and for the strategies of donors is immense. We recommend that the World Bank, the IMF and other donors commission further research into the macroeconomic impact of HIV/AIDS so as to establish a consensus as to impact which can then be applied to particular countries.

72. Even on the basis of what is already known, we would expect the World Bank and the IMF to be taking into account the effect of HIV/AIDS when agreeing structural adjustment policies and loans with severely affected countries. We heard evidence that the World Bank needed to reconsider its approach to structural adjustment given the impact of HIV/AIDS. Alan Whiteside, for example, with reference to a common component of structural adjustment policies, said, "I am appalled we have this whole concept of slimming down civil services in African countries, making them meaner and leaner, because by the time they are mean and lean we have an AIDS epidemic eating in and we are losing people from lean and mean civil services".[78] Dr Peter Piot was also concerned "about the effect of structural adjustment on the AIDS epidemic".[79] Amongst the consequences of structural adjustment programmes were accelerated urbanisation and increased population mobility, "Structural adjustment raises particular problems for governments because most of the factors which fuel the AIDS epidemic are also those factors that seem to come into play in structural adjustment programmes".[80] More broadly, he said, "It is crystal clear to me that the AIDS epidemic has not been integrated into longer term planning, public sector or the whole structural adjustment issues".[81] DFID state, "It is essential that Poverty Reduction Strategy Papers and other national planning approaches take HIV/AIDS fully into account, both from the perspective of the likely impact of increasing illness and death on the economy, and the potential for well-coordinated, multi-sectoral strategies to reduce that impact".[82]

73. The World Bank in its recent publication 'Intensifying Action against HIV/AIDS in Africa' mentions briefly that "Efforts will be made to integrate HIV/AIDS into reform programmes, structures, and social policy reforms for beneficiary countries".[83] There seems little information, however, on either IMF or World Bank websites as to how HIV/AIDS has affected their approach to structural adjustment and in particular such issues as civil service reform, assumptions on macroeconomic prospects and future revenue flows, and so on. Structural adjustment policies, and in particular the World Bank and the IMF requirements for public sector and macroeconomic reforms, cannot continue unaffected by the impact of HIV/AIDS. We recommend that the Government request the World Bank and IMF to provide information on how they are changing their approach to civil service reform and macreconomic policy in response to HIV/AIDS.

74. The same sensitivity to macroeconomic impact is clearly required of national governments, and we would therefore expect to see evidence that both the United Kingdom and the European Union were taking account of HIV/AIDS in their macroeconomic assessments. Examining DFID country strategy papers (CSPs) for some countries with high HIV/AIDS prevalence rates, there seems little if any discussion of HIV/AIDS as a factor in economic profiles and prognoses. It is rather considered as a health issue and as a major cause of poverty. This is not surprising, perhaps. It is only recently that research has begun to emerge on the issue. Nevertheless, we recommend that in new and revised country strategy papers DFID include comment on how HIV/AIDS is expected to affect future economic performance, explaining how both the country's economic strategy and DFID's approach are taking such economic impacts into account.

HIV/AIDS and agriculture

75. The Committee took evidence from Jacques du Guerny of the Food and Agriculture Organisation (FAO) on the impact of HIV/AIDS on the agriculture sector. Between 60 and 70 per cent of people in Africa live in rural areas. Jacques du Guerny pointed out that the methods of agricultural production had changed, "there is no more subsistence agriculture. This is something of the past. Therefore, all these farm household units are somehow related to the outside world — fruit markets — but also through rural urban migration. They need to be attached to the outside world, either to sell their products but also in order to get back remittances, or to relieve the pressure on the land. Therefore it is through such mechanisms that the farm household system is dependent also on the broader urban economy, and that through these exchanges the virus has the possibility to move into the rural areas and to spread".[84]

76. Jacques du Guerny emphasised that statistics on the prevalence of HIV/AIDS in the rural communities were limited. Most statistics were extrapolations from ante natal clinic surveys, which were urban-based. Prevalence was higher in urban areas, with rural prevalence being usually low until a few years ago.[85] The virus spread into rural areas, however, though markets, border crossings, and through the new mobility of workers between rural and urban areas. Even if rural prevalence remained lower than that in the cities, the fact that the majority lived in rural areas meant that even the lower rual prevalence was having a significant effect on the national figures for those infected with HIV/AIDS.[86] Jacques du Guerny stressed that it would be a mistake to see the rural population as homogeneous — there were distinct epidemics amongst different rural groups, artisanal fishermen, pastoralists, those on plantations etc.[87]

77. The impact of HIV/AIDS on the agriculture sector depended on the farming system, and in particular on the system's margin of security. Wealthier farm households are obviously more resilient than poorer ones, but there are also systems which are more vulnerable, for example those who farm in semi-arid areas such as the Sahel or northern Kenya, where rain is more uncertain and there is as a matter of course greater vulnerability to shocks.[88] He pointed out that "The problem with AIDS is that it takes a long time. A sudden death is more easily absorbed as a shock because these systems are traditionally more used to it. It is a protracted disease which stops people earning income and they require expenditure. That is one of the very insidious aspects of AIDS. Also, in these very traditional communities, when they are in the beginning phases of the disease, since they can be quite common diseases, they do not associate it with what is really going to happen. So they will make all the investments necessary to try to get care etc. In poor households, one of the problems also is the time which is taken up in care and things like that. Since basically these households' main assets are often their labour, anything which is deducted from that can have quite a serious impact".[89]

78. Thus the impact of HIV/AIDS on the rural poor includes the loss of income as household members fall ill and die, and the extra expenditure incurred in taking care of those who are ill, which diverts not only money but also labour. Often those who have gone to urban areas to get work will return to the village when ill. Thus remittances end and at the same time there is an increased burden of care. There are various knock-on effects on the agriculture sector. One is that farmers tend to abandon labour-intensive crops such as coffee and drop the cultivation of those fields which are further away and thus take up more time, "They do tend to retrench to subsistence crops such as cassava and things like that. Therefore, this has an impact on the nutrition of the family. On the one hand, there is less cash with which to buy possibly other foods. They also revert to less nutritious foods because they are generally easier to produce".[90] Jacques du Guerny suspected that there was also a differential impact on cultivation and nutrition depending on whether it was the man or the woman who was first ill, though research had yet to be carried out in this area.[91]

79. HIV/AIDS takes a disproportionate toll on the mature working population. Jacques du Guerny made the point that rural communities were in the past quite used to high levels of mortality, "What is different, however, in this case, is that it is not the usual categories of people who die: the infants, the children and the elderly. It is the young adults".[92] This means that it often the young and the old who are left. We discuss separately the impact of HIV/AIDS on the elderly and children. The point to make here is that there is also a significant impact on the agriculture sector where those remaining to do the work are grandparents and children. Both daughters and sons drop out of school as HIV/AIDS has an effect on their parents, daughters helping their mothers in the kitchen and sons, for example in pastoralist societies, taking over from sick fathers in looking after the herds. Not only do the children drop out of school but they also "tend to become less good farmers because the transmission of knowledge is done through working with the parents. Therefore this process can be interrupted and they can be less skilful or knowledgeable in the tasks they have to carry out ... the various epidemics mortgage the future of these children. One could very well see that instead of having a development process, not only would development be stopped but a reverse process might be happening because the children could be less educated, less skilful than their parents".[93] In livestock-dependent communities children are less able to look after the animals, from both a lack of strength and training, and thus the livestock die, depriving the households of their only asset.[94]

80. Not only does HIV/AIDS have an impact on the farm household system. There are also severe implications for ministries of agriculture and the commercial agriculture sector. Jacques du Guerny told us, "The staff of the ministries of agriculture are being decimated in some cases. They are often losing extension workers, they are losing highly qualified staff and they can be extremely difficult to replace ... It is going to be a complex process for ministries to adjust to the impact of the epidemic and to respond. Also it creates a lot of cost for the ministries because replacing qualified staff is something which is extremely expensive. It creates all kinds of disruptions in the way the ministry functions because people have to attend funerals".[95]

81. Studies in Kenya suggested that the commercial agriculture sector was also affected "because unskilled labour might seem cheap but it is still costly to replace. It is not unskilled as it appears to be, they always have some skills. Therefore, when the replacement arrives that person has to learn. You also have skilled people in the commercial agriculture sector, managers etc, and their costs, they can be extremely difficult to replace because they really know the plantation etc and you cannot just bring in a very good agronomist or whatever from the outside to run the plantation overnight".[96] There were also extra costs arising from absenteeism due to illness or funerals and also from health schemes. Costs were also being affected even when the work was contracted out to small farmers as in the sugar industry, where because the sugar cane was being cared for less well as a result of the impact of HIV/AIDS it took more tonnes of sugar cane to make a tonne of refined sugar.[97]

82. This examination of the impact of HIV/AIDS on the agriculture sector clearly demonstrates the need for national ministries of agriculture and donors to reassess how best to support agriculture and rural livelihoods. Jacques du Guerny argued that "it would be important to make specific efforts to improve data collection in rural areas, since 60 to 70 per cent of the total population of many African countries are there".[98] We recommend that UNAIDS coordinate surveys of HIV incidence and prevalence in rural areas to improve understanding of the rural aspects of the epidemic. We are concerned that at present there is too much reliance on data collected from ante natal clinics, thus reinforcing an urban bias to data since rural areas are less well served by such infrastructure. Similarly, further research is needed into the various ways in which HIV/AIDS is spreading in and affecting different sorts of agricultural community.

83. Jacques du Guerny believed that to date HIV/AIDS programmes have been inadequately targeted on rural areas, "There have been a number of efforts but they tend to be small-scale like NGOs, etcetera. They have very limited access and resources. Up to now there has been a tendency to focus more on urban areas. We need to balance it more because urban and rural areas are so interlinked, it does not make sense just to work on one side".[99] We recommend that DFID comment on the claim that HIV/AIDS interventions have been too urban-based to date and give details of those rural and agricultural projects currently supported by DFID which have the tackling of HIV/AIDS as a primary component.

84. The evidence from Jacques du Guerny points to a number of ways that development needs to be 'rethought'. He said, "I think at this stage whether it is agricultural policies and programmes, whether it is educational policies and programmes, in the strongly affected countries they have to be reconsidered, it cannot be business as usual".[100] Of central importance is the rethinking of strategies by Ministries of Agriculture. The FAO clearly has a role in encouraging such a process but we were told that it was difficult, "for an agency like the FAO to barge ahead in the area of AIDS if the member states at the FAO Conference do not give instructions in this direction".[101] We recommend that MAFF advocate a clear mandate for the FAO in combatting HIV/AIDS and assist the FAO in consideration of how best to support Ministries of Agriculture faced with high HIV/AIDS prevalence.

85. We would also bring a number of other matters to the attention of DFID, recommending their inclusion in DFID's HIV/AIDS strategy and their promotion in dealings with other donors and national governments:

  • education policies should be reviewed to provide rural children at a younger age with marketable skills, agricultural knowledge, survival and income-generating skills for city life[102]
  • human resources in Ministries of Agriculture should be reviewed urgently to minimise the impact of the loss of skilled workers to HIV/AIDS. Adaptable civil service systems will be necessary to adapt and shorten chains of command[103] and technical assistance may well be needed
  • rural credit should be developed to prevent destitution and there should be consideration of land tenure systems
  • the legal and human rights of women, children and the HIV-positive require attention and protection in rural communities.

68   UNAIDS AIDS epidemic update: December 2000 p.17 Back

69   See Q.136 and UNAIDS AIDS epidemic update: December 2000 p.18 Back

70   UNAIDS AIDS epidemic update: December 2000 p.18 Back

71   Evidence, p.286 Back

72   Evidence, p.286 Back

73   UNAIDS AIDS epidemic update: December 2000 p.17 Back

74   UNAIDS AIDS epidemic update: December 2000 p.17 Back

75   UNAIDS AIDS epidemic update: December 2000 p.18 Back

76   Evidence, p.286 Back

77   Evidence, p.16 Back

78   Q.123 Back

79   Q.497 Back

80   Q.497 Back

81   Q.498 Back

82   Evidence, p.16 Back

83   'Intensifying Action against HIV/AIDS in Africa' World Bank 1999 p.36 Back

84   Q.413 Back

85   Q.423 Back

86   Q.423  Back

87   Q.424 Back

88   Q.426 Back

89   Q.426 Back

90   Q.428 Back

91   Q.428 Back

92   Q.418 Back

93   Q.429 Back

94   Q.448 Back

95   Q.441 Back

96   Q.452. Back

97   Q.452 Back

98   Q.416 Back

99   Q.425 Back

100   Q.440 Back

101   Q.440 Back

102   Qq.435, 441, 444-5 Back

103   QQ.441-2 Back

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