Memorandum submitted by the Department
for International Development
The importance of AIDS is that it is creating
significant increases in illness and death, mostly among young
adults. UNAIDS estimates that around 16 million people have died
since the beginning of the epidemic. Although some would have
died of other causes, the vast majority would still be alive if
it were not for HIV/AIDS. Deaths to date are the tip of the iceberg:
more than twice as many are currently living with HIV infection.
Most of these will die within the next ten years. During that
time many more will have become infected (around 16,000 new infections
per day at present). This will create a continuing, rolling burden
of illness and death well into the 21st century. The effects of
this steep rise in illness and death rates are therefore mostly
still to come.
The majority of the 16 million deaths have happened
in recent years. There has been time to observe the impact on
individuals and households, and to some extent on health services
and enterprises in the most affected countries. It has been less
easy to observe the impacts on the economy as a whole and on prospects
for development. It has been notoriously difficult to predict
the course of the epidemic: the worst hit countries have been
affected far more badly than expected, while other countries have
had fewer cases than anticipated. The risk factors are well understood,
but accurate epidemic forecast needs a much better understanding
than we have of the levels of risk behaviour in different countries
and communities, and of the precise ways in which the risk factors
influence each other. At the same time, the economic future is
notoriously hard to predict. Trying to combine forecasts of the
epidemic with forecasts of the economy at macro level is then
doubly difficult. This memorandum will describe some of the research
on the future economic impact of HIV/AIDS, and will explain some
of the difficulties in obtaining a clear vision.
The memorandum will also present the findings
of research into the impacts of HIV/AIDS on livelihoods: on households,
formal and informal work forces, and enterprises. It will look
in some detail at specific issues such as education, which is
especially important as a form of investment in the future. The
memorandum will flag some of the main policy implications, in
particular the need for the response to be multi-sectoral under
much stronger national and local leadership.
Most of the information that exists deals with
Southern Africa. This is where the epidemic is at its worst and
where it has therefore attracted the most research and analysis.
We refer to other countries in cases where good, illustrative
data exist. If it becomes possible in coming years to define more
precisely the macroeconomic impacts of HIV/AIDS, this will happen
first in the worst affected countries of sub-Saharan Africa. Rather
than wait for such specificity, however, it is important for leaders
in all countries to understand the existing and possible impacts
of increasing illness and death on enterprises, households and
individuals, and to place a suitable level of priority on actions
for mitigating them. The level of that priority will depend, to
a large extent, on best judgements about the future course of
the epidemic in each country, and on improvements in our knowledge
about impact. There is a considerable, unfinished research agenda
for understanding impact better, and for applying the knowledge
to policy and practice.
The memorandum begins with a brief overview
of the huge varieties among national epidemics, and then takes
a view of the impact of increasing illness and death on households
and enterprises. It considers people as providers of labour within
households and in the public, private, formal and informal sectors.
It describes some of the thinking on how high illness and death
rates affect "investment in the future", especially
at the macroeconomic level and in education and health services.
It then takes a look at the international development targets,
for some of which the impacts are easier to predict than others.
It notes some of the rather speculative material on the impact
of increasing illness and death on political and social stability.
The second part of the IDC's call for memoranda
requested information about the response to the effects of HIV/AIDS.
The memorandum will, in fact, try to cover that as it works through
the topics listed above.
The purpose of this section is to emphasise
how uneven the epidemics are among countries and within them.
Because of that unevenness, the impacts will vary greatly from
place to place; the local, national and international responses
will therefore need to be tuned to those variations.
HIV prevalence is most often estimated for adults
between the ages of 15-49. Most new cases occur between the ages
of 15-24 (for women) and 20-29 (for men). In more than a dozen
sub-Saharan countries, over 10 per cent of 15-49 year olds have
HIV infection. In a few of these countries, rates are up to 20-25
per cent. In some towns or communities in those countries, the
rates are significantly higher: 40 per cent and more has been
recorded, for example, along major transport routes.
Some countries in the Caribbean, including the
north coast of South America, record the next highest HIV prevalence
levels. The highest is around 5 per cent. In South and South-East
Asia, about 2-4 per cent adults have HIV infection in Burma, Cambodia,
parts of India and Thailand. These Asian and Caribbean countries
are drawing the attention of policy makers who are concerned that
infection levels may follow the same pattern as they did in the
worst affected sub-Saharan African countries. While there is no
evidence, yet, that they will follow the African pattern, HIV
epidemics have proved to be highly unpredictable: urgent, intensified
action is needed in these countries to make sure that explosive
spread of HIV does not occur. Nevertheless, with infection levels
at one-tenth or less of the worst hit countries in sub-Saharan
Africa, the impact has, so far, been proportionately less.
Table 1 shows the UNAIDS and WHO estimates for
HIV prevalence by country as at the end of 1997.
UNAIDS categorises the level of HIV prevalence
in countries as low level, concentrated or generalised. In countries
with low HIV prevalence, no sub-populations such as sex workers,
injecting drug users or males who have sex with males have HIV
prevalence of more than 5 per cent. The infections that do exist
are mostly confined to those groups. Countries in which the pattern
of HIV prevalence is categorised as concentrated are those in
which more than 5 per cent of people in at least one such sub-population
are infected. Infection remains below 1 per cent among pregnant
women. It is not well established in the general population, but
the level in pregnant women indicates that it has spread beyond
the main risk behaviour groups.
UNAIDS categorises the level of HIV prevalence
as generalised in countries where more than 1 per cent of pregnant
women are infected. This indicates that HIV is well established
in the general population. The prevalence in risk behaviour groups
can be expected to be high.
Under this categorisation, the Asian countries
mentioned above and several of those in the Caribbean would be
grouped with countries in sub-Saharan Africa in which prevalence
levels are 5-10 times higher. Classification systems are evolving
and may capture this apparent anomaly in due course. However,
it may also be useful to keep the threshold for generalised epidemics
at a low level: the World Bank has pointed out that in countries
with the worst epidemics, the most explosive growth began around
the time that prevalence reached 5 per cent in adults
For the purposes of this memorandum, it is also
worth noting that in countries with low prevalence and those with
generalised spread, the epidemics are concentrated in risk behaviour
groups. In the worst-hit countries it may also be at very high
rates across most of the population, but in much of the world
the spread into the general population is still focused, mainly,
on sexual partners of people in the high-risk behaviour groups.
This has implications both for the impact, which
concentrates around the groups most affected, and for the response,
which must focus on preventing further spread within and from
the risk behaviour groups and on mitigating the impact around
them. As we shall see, that impact affects their families, their
own enterprises, and their employers.
COUNTRY PREVALENCE DATA
(Source: Taken from UNAIDS/WHO "Report
on the Global HIV/AIDS EpidemicJune 1998"; Geneva)
The data provided in the above tables are summarised
from the individual country 1997 Epidemiological Fact Sheets.
For countries marked with an asterisk, not enough data were available
to produce an estimate of HIV prevalence for end 1997. For each
of these countries the 1994 prevalence rate published by WHO/GPA
was applied to the country's 1997 adult population to produce
the estimate given in the table (UNAIDS/WHO 1998 "Report
on the Global HIV/AIDS Epidemic"; Geneva: pp59-67)
Some figures are subject to rounding and may
not total accurately, particularly figures for adults and children.
Country estimates marked with a "d"
are based on reported AIDS cases, corrected for under-reporting,
multiplied by the cumulative reported case fatality rate by country.
Households are complex and vary widely from
place to place and over time. Variables, often inter-related,
include the following:
household structure: number of adults,
children, grandparents and other relatives;
number of cash earners, and whether
resident or away from home;
how much they earn, how consistently
throughout the year, and how the income is spent and by whom;
the degree to which cash requirements
arising from illness and death will be met through borrowing;
the availability and cost of credit;
labour demands on the household,
eg for farming/food production, other forms of production; whether
labour is provided by children, adults or the elderly;
if the household is an enterprise,
its vulnerability to loss of household labour; the degree to which
labour is replaceable; division of labour between women and men;
if labour is replaceable within the
household, whether the replacement comes from children; the long-term
impact of their withdrawal from school;
if the household depends on subsistence
farming, the degree to which the subsistence element is supplemented
by cash, and vice versa;
investment decisions including savings
and other assets, if any;
how many and which sex of children
at school (which affects future income and security foregone if
they are withdrawn from school).
Households in poor countries are used to illness
and death. For example, a poor woman in a poor country is more
than 500 times more likely to die in childbirth than a rich woman
in a rich country. However, in the countries worst affected by
HIV/AIDS, the amount of adult illness and death is now been intensified
many times over, and it is affecting mainly people in their productive
and reproductive primes. Some households lose more than one adult;
if that happens in a nuclear family, or if it happens to more
than one cash earner or food producer in an extended family, the
impact will be proportionately greater.
For example, a study in Kagera, Tanzania, an
area of extremely high AIDS morbidity and mortality, found the
First, some households are more vulnerable than
others to an adult death. The average household suffering an adult
death had to reduce the consumption of survivors, but the size
of the reduction varied, depending on the characteristics of the
household and the deceased adult.
Second, household coping strategies succeed in
limiting the short-term impact of an adult death only at the expense
of serious longer term consequences. For example, when prime-aged
women die, malnutrition increases among their orphaned daughters
under age three, and the schooling of older children is sacrificed.
Third, adult mortality from AIDS and other causes
is only one among many roots of poverty and low living standards
in Kagera, and it is not the most important one.
Variability in households' ability to cope with
increased illness and death is influenced by the factors in the
list, above, and the interplay among them. In rural areas, it
can be further influenced by the robustness of the farming system.
This has implications for rural-development policy makers, who
need to concentrate on poor communities and households where livelihood
security is fragile. This is not a new priority but the added
burden of HIV/AID-related illness and death, and the increased
threat to livelihood security, should give greater emphasis to
the targeting of development programmes. It implies the need for
a sound knowledge of patterns of poverty and how they are being
influenced by HIV/AIDS.
Most investigations into the impact on households
have been in rural Africa, where agriculture is the largest sector
and where many urban households have family links to the rural
economy, mixing wage earning with farm production. There is, however,
a useful and illustrative investigation from Thailand. Examples
of impacts on households include the following.
Rural Thailand: the direct and indirect
costs of an HIV/AIDS-related death on rural Thai households were
greater than the cost of death of other causes. Direct medical
care cost the equivalent of about six months' household income.
Most of the indirect costs were accounted for by lost income.
This was higher than for households experiencing a non HIV/AIDS-related
death because the people dying from AIDS tended to be younger,
and were therefore losing more years of work. The lost income
of care providers accounted for only a small proportion of the
About half of the families studied experienced
substantial negative impact on family labour supply and production.
The loss of production was nearly 50 per cent, contributing to
about a 47 per cent loss in household income. Nearly half of the
families that had experienced an AIDS-related death had a problem
with caring for elderly family members: 43 per cent had to look
after themselves, while extended family members cared for around
half. Care for the elderly was more of a problem for households
experiencing an AIDS death than for those with non-AIDS deaths.
Nearly half of households experiencing AIDS-related deaths had
experienced economic or non-economic discrimination, including
pressure to leave a job, customers and employees leaving the household
business, lack of new customers, and not associating with adults
or children from households that had experienced HIV infection.
The study found a few cases in which families had been pressured
to leave the community or to withdraw their children from school.
Households adopted a number of coping strategies.
About 60 per cent of the households used savings to meet their
increased costs. The savings were enough to cover nearly 90 per
cent of total health care costs up to the time of death. Nineteen
per cent sold assets, mostly land, vehicles and livestock. They
used this money to meet the health care costs and to maintain
other household consumption. Households with few resources reduced
consumption. About half of households took this route, of whom
nearly a third consequently experienced a serious reduction in
welfare. On average, consumption of food and beverages dropped
by about 40 per cent.
Many households reallocated the time spent on
various activities. This mostly involved more income-earning work,
helping with the family business, reducing work within the family,
looking for work, taking higher paid or supplementary work, or
leaving work to help with family chores and care of the sick person.
In particular, the elderly took on more work. Children were sometimes
withdrawn from school, releasing short-term benefits but undermining
future earning and life opportunities. Forty per cent of the households
that had a family business hired substitute labour, considered
a risky strategy in the face of rising expenses and falling income.
Eleven per cent of the households borrowed money to help cope
with expenses, mostly from relatives or money lenders, also from
co-operatives for local revolving funds, but generally not from
formal institutions such as banks. Amounts borrowed ranged from
$360 to $9,500. The larger loans tended to come from money lenders,
a particularly expensive form of credit.
Fifteen per cent of the household received financial
support from relatives or extended family members, averaging around
$30 per month. This money usually came from adult children or
the siblings of the head of household.
Private health insurance and employer's benefits
in Thailand do not cover HIV/AIDS illness, but some households
claimed under these schemes by reporting the cause of death as
non HIV/AIDS-related. This diverted part of the burden from a
small minority of the households. Of those receiving financial
support for medical care, about 10 per cent received services
from a Government Rural Public Health Programme, and 14 per cent
benefited from the Health Ministry's Voluntary Health Insurance
Scheme. Another 9 per cent received employment welfare benefits
from civil service or public enterprise employers.
Not surprisingly, all of the above coping strategies
were more difficult for low income households, including access
to government subsidies for health care. Children from higher
income households were more likely to be cared for by extended
family members, while children from poorer households were more
likely to be cared for by an orphanage or temple.
The researchers concluded that the poorest and
least educated suffered a greater economic shock than higher income
and better educated households. Their ability to cope was more
limited as they had fewer household resources and less access
to non-family institutions to help pay for medical care. This
implies that the poor have a greater risk than the wealthier of
slipping into deep poverty; and that the burden will tend to fall
particularly on individuals and their households because of the
lack of institutional support for the poorest families. The researchers
felt that the burden of medical costs would be likely to increase
The study showed that AIDS deaths had greater
economic impact than non-AIDS deaths because the infected adults
were younger. The study supported previous evidence that AIDS
deaths had a greater negative impact on household income and led
to a larger reduction in consumption than non-AIDS deaths. Discrimination
was also greater.
The Thai Government had taken steps to reduce
rural poverty since the early 1980s. The researchers proposed
measures in a range of areas to adjust those poverty reduction
strategies. These included the following: responding to increased
demand for basic welfare, from both government and NGO sources;
efforts to meet the educational and skills-training needs for
young people, including the provision of alternatives to the sex
industry for young girls; support for easier access to affordable
credit in rural areas; strategies to enable poor farming families
to have access to input subsidies, and other strategies such as
exchange of labour during farming seasons; some kind of government
assistance package to help extended family members to care for
orphans and elderly dependants; an evaluation of government medical
subsidy programmes, and steps to make sure they reach the poorest
households; and the development of government policy to protect
the human rights of people with HIV/AIDS, combined with public
education campaigns against discrimination. It is noteworthy that
most of these policy measures are about relieving the poverty-enhancing
consequences of illness and death, and do not relate to AIDS specifically.
This is an important point: as much as possible, the impact-mitigation
focus at household level should be on the protection of livelihoods
and well-being (both present and future) and not on this disease
We have gone into some depth on the Thai case
study as it sets out many of the dimensions of the impact of HIV/AIDS
at the household level. Studies of households in sub-Saharan African
contain similar analysis. The following paragraphs draw on existing
syntheses that usefully illustrate household impact in sub-Saharan
Africa, without unduly duplicating the Thai analysis.
Rural sub-Saharan Africa: research findings
show that the main impact of HIV/AIDS, as with other causes of
illness and death, is on human capital, especially in terms of
labour. A case of HIV/AIDS-related illness and death generates
a loss of about 2-person years of labour. While the death relieves
the burden of care for that individual, it also represents the
permanent loss of that person's labour. In the case of a woman's
death in particular, part of the lost labour would have been used
for care functions within the family. See Annex 1 for a useful
summary of type and timing of input.
Households may take a number of steps to adjust
to the loss of labour, including reduction in consumption, working
longer hours, bringing young people into work earlier or extending
their working years longer, or changing household composition
to adjust the dependency ratios. However, available information
concerning changing dependency ratios as a result of HIV/AIDS
is limited. Data from Kagera, Tanzania, suggest that in this region
at least, HIV/AIDS has not greatly affected dependency ratios
(World Bank, 1997). Although among the surveyed households, 130
individuals died over the research period (from a population of
759 households), over nine times this number left the households,
over seven times this number joined the households, and 200 children
were born. The average size of a household that experienced a
death declined from 6.0 to 5.7 and the dependency ratio increased
from 1.2 to 1.4. The authors conclude that "household size
and dependency ratios changed very little". This one example
suggests a fluidity of household structures and that households
may often be able to cope with shocks through some re-balancing
of their dependency ratios. Similar results were found in Rakai,
Uganda, where household dependency ratios increased from 1.2 to
1.5 as a result of an adult death from AIDS.3
For households dependent on agriculture, the
consequent intra-household reallocation of labour can lead to
declining crop production, resulting in food insecurity and an
overall decrease in financial assets. Households may then respond
with a further range of coping strategies. For example, in Uganda,
a typical initial response by a farming household is to change
to the mix of farm products, first to produce enough for subsistence
and then to grow surplus to sell at the market.4
Depending on circumstances, farming households
that can no longer afford to pay wages may reduce the use of wage
labourers, grow less intensive crops, and use labour from the
extended family. Other households may hire additional labour to
replace that loss.4
Farm households may also reduce the area of
land under cultivation, reduce the variety of crops, and reduce
the number of livestock. When a parent dies, the children lose
their main source of agricultural education and skills.5
Other households may actually increase their
livestock if soil becomes infertile or the growing of crops is
too labour intensive. This assumes that, at least for the time
being, they do not have to raise money through livestock sales.
Households may also switch from larger animals to smaller ones.
Research into the impact on small farm households
needs to take account of existing practices and how they vary
from time to time and place to place. FAO research has found,
for example, that in some areas, "more than 40 per cent of
farming households supplemented their income with non-farm activitiesoften
home-based, low labour activitiesas a matter of course.
These activities varied in scale depending on the wealth of households
involved".6 Many households supplement farm earnings or subsistence
with non-farm earnings. The FAO noted that HIV/AIDS-affected households
appeared to rely increasingly on non-farm, income generating activities.
This was particularly the case for female headed households.v
The success of households in generating different
sources of cash income clearly depends not only on external opportunities,
but also on the assets available to them and the diversity of
their existing livelihoods. The FAO studies found that households
that did not pursue off-farm income-generating activities often
did not do so because they did not have the capital required.
In contrast, households already involved in a fairly large number
of income-generating activities, as well as farming, were able
to buffer themselves against the impact of HIV/AIDS. This indicates
that livelihood diversification is a key factor that mitigates
against the impact of such shocks.7
The paragraphs above illustrate the diversity
of impact on households. The intensity of impact is determined
to a large extent by households' ability to cope, and ability
to cope is determined to a large extent by aspects of livelihood
security. These include access to financial and non-financial
assets, levels of income, access to employment, access to credit,
levels of education, and access to health and social security
systems. In agricultural areas (which is where most of the population
in sub-Saharan Africa lives), agricultural policies need to be
adjusted to reflect the coping strategies of poor households.
Agricultural extension programmes need to be able to advise small
farmers on what alternative livestock or cropping systems are
available to them and to promote innovations in farming that families
can handle when faced with adult illness and death. At the same
time, poor families need access to affordable credit, a need that
is intensified when their security is further undermined by illness
and death. There is then a need for collaboration among the government
departments responsible for agricultural policy, extension, and
rural credit, as well as those responsible for a range of other
services that should be available to poor families, including
access to markets, education and healthcare. This analysis captures
the reasons why the impact of unusually high levels of illness
and death needs to be dealt with as a set of new development and
service-provision challenges, rather than simply as a matter for
the health sector.