BUSINESS AND THE PRIVATE SECTOR
51. HIV/AIDS is also having a significant impact
on the economies of developing countries, an impact which is only
going to become more severe as the HIV epidemic turns into an
AIDS epidemic. Crown Agents warned that the epidemic would result
in "a dramatically negative economic impact on national growth
with huge losses in skilled workers, reduced productivity and
eventual depletion of the national skills base".
52. Before considering the macroeconomic impact of
HIV/AIDS, we must examine effects at the level of business and
private sector operations. One obvious way in which HIV/AIDS has
an impact on business is through the loss of workers. The ILO
in its Report 'HIV/AIDS: A threat to decent work, productivity
and development' states, "AIDS deaths lead directly to a
reduction in the number of workers available, and particularly
workers in their most productive years".
The Report goes on to estimate the effect of HIV/AIDS on the workforce.
We have discussed above the impact of HIV/AIDS on population growth.
The ILO's conclusion is that "the labour force in high prevalence
countries in the year 2020 is estimated to be about 10 to 22 per
cent smaller than it would have been if there had been no HIV/AIDS.
The labour force is still expected to keep growing. But because
of the increased mortality, there will be about 11.5 million fewer
persons in the labour force".
Anglo American stated, "In South Africa some companies are
losing around 3 per cent of their workers each year to AIDS".
53. Lower life expectancy will thus constrain developing
economies in that there are fewer workers available. It has been
repeatedly emphasised that HIV/AIDS affects disproportionately
the adult working population, producing a "loss of people
in their 30s and 40s: people who keep the wheels of commerce and
the state turning, and provide the next generation of leaders".
Christopher Wheeler from Standard Chartered Bank said, "Approximately
three years ago we started to notice a higher incidence of sickness,
of death in service, and so forth".
He estimated that up to 30 per cent of their workforce in Zambia
could be infected .
Clearly such high incidence of HIV in a workforce will have serious
implications for staffing, not simply in terms of increased mortality
but also much higher incidence of sickness and a decline in morale
amongst the workforce.
54. The TUC said, "There is some evidence to
suggest that with high unemployment and underemployment in many
countries, the shortfall in the labour supply has been met by
people seeking employment".
There will be presumably be a corresponding effect on labour costs.
But workers are not always so readily replaceable. Most workers
receive some training from their employers, an investment unrealised
when the worker is lost through premature death. This effect is
greater, the greater the skill of the worker lost. As the TUC
put it, "Replacing such skilled workers is difficult and
while it might be possible in some cases to substitute capital
or technology for a dwindling workforce, this is not always an
option. The situation is exacerbated by the toll that HIV/AIDS
is taking on the education sector".
55. The dangers of the loss of skilled staff were
acknowledged by Standard Chartered Bank, "our staff are highly
trained in the use of technology but, with there already being
a shortage of skilled manpower, an organisation such as ours needs
to minimise the risk of losing such staff and look after those
that become unwell".
Given such dependency on skilled labour, the Bank is monitoring
closely the impact of HIV/AIDS on numbers of staff, "In addition,
vigorous recruitment and retraining drives are underway particularly
in the businesses in some of the countries where infection rates
are estimated to be between 25 per cent and 40 per cent
including Zambia, Zimbabwe and Botswana. This is in order to ensure
we are able to maintain the level of service and staffing levels
required by the business/customers".
Anglo American also make the point that even before the HIV/AIDS
epidemic "Sub-Saharan Africa starts with the lowest proportion
of skilled workers of any geographical region and with a disproportionate
share of the world's poorest countries" it is thus
least able to support the loss of skilled workers to the disease.
ING Barings estimate that by 2015 19 per cent of skilled workers
in South Africa will be HIV-positive.
They also warn of cost pressures arising from increased training,
staff replacement costs, skill shortages and higher benefit payments.
Anglo American have introduced "the concepts of multi-skilling
and self directed work teams have been implemented at many of
56. Many of the effects of HIV/AIDS are quantifiable.
Many others are not they concern morale, confidence, a
sense of security and purpose and yet these are as fundamental
to personal happiness and to social life. Standard Chartered Bank
spoke in their memorandum of the impact on staff morale as workers
lose loved ones and breadwinners, "One of our senior staff
lost her husband, all her brothers, and two sisters to AIDS. She
later died of AIDS. Her story is not rare".
They estimate that 70 per cent of staff in Africa "have close
relatives and/or friends, who are infected with the HIV virus,
have died or are dying".
57. Dr Brian Brink warned against too alarmist a
view of the impact of HIV/AIDS on companies, "When one first
hears prevalence figures the reaction often is one of alarm but,
in fact, the situation despite what might appear to be large numbers
can still be very manageable".
Jenny Crisp from Anglo American referred to the company's operations
in Zimbabwe, where the epidemic was quite advanced. She agreed
that HIV/AIDS was having an impact but added, "it is not
putting any of our companies out of business ... you might have
a situation where you have a pool of employees and the infection
level might be as high as 25 per cent but most of that 25 per
cent at any one time in fact are well and fit, they are not getting
sick. If you think that the average time from infection to becoming
ill is eight years, then the 25 per cent will get sick over a
six-year period. So the numbers who are getting sick each year,
and our figures in Zimbabwe show this, is about two and a half.
That is actually manageable".
58. It must be remembered that those who came to
give evidence are precisely those companies which are attempting
to reduce infection rates in their workforces and mitigate the
impact of the epidemic. Moreover, they are multinational companies
with considerable resources at their disposal and better placed
than most to accommodate extra costs. We should not make the mistake
of assuming that all businesses are in the same position. Jenny
Crisp agreed that there were many companies which were not facing
up to the epidemic, "that is part and parcel of this whole
denial. The denial does not necessarily apply to the individual,
it applies to the organisation as well. I think it is something
that is not peculiar to the AIDS problem. I think a lot of companies
tend to be reactive rather than proactive".
Those doing something were "a small minority".
We are sure that many large, multinational companies have yet
to assess the likely impact of HIV/AIDS on their activities, are
missing vital opportunities to reduce HIV/AIDS incidence, and
are thus going to see their productivity and profitability seriously
59. When pressed on whether the companies giving
oral evidence to us would remain profitable in these countries
Christopher Wheeler said, "I would suggest that for relatively
sophisticated organisations who are able to provide the level
of education and understanding of the issues, that is possible.
I would suggest that there are many local companies who would
find that difficult to achieve".
Clearly small and medium-sized businesses in sub-Saharan Africa
will be severely affected as an increasing number of HIV-positive
people succumb to AIDS. Christopher Wheeler told the Committee
of work done by Standard Chartered Bank with local business and
customer groups to spread prevention messages.
Jenny Crisp was less clear as to the opportunities for Anglo American
to pass on HIV/AIDS good practice directly to local businesses,
"We do not have a programme to address HIV and AIDS with
our suppliers simply because they are so numerous and generally
we do not have contact with them".
Dr Brink mentioned the Business Council on AIDS in South Africa
as an important forum to assist SMEs in considering HIV/AIDS matters.
He stressed that "certainly for South Africa and probably
southern Africa, the growth of small and medium enterprises is
critical to the development of the economy, so we have to find
a way that those small businesses also take their part in dealing
DFID in its booklet Enterprise and Development states of SMEs
that "Their often labour intensive nature means they are
a leading source of job creation in developing countries. Their
ability to respond flexibly to dynamic markets is imperative for
sustainable economic growth in today's globalised economy".
DFID employs some 25 Enterprise Development Advisers and Field
Managers in London and overseas who supervise a current portfolio
of project commitments totalling over £200 million. We note
that in the booklet 'Enterprise and Development' there is no mention
of challenge posed by HIV/AIDS, never mind of how to face it.
No doubt the document is not intended to be exhaustive. Nevertheless,
the impact of HIV/AIDS on small and medium-sized enterprises,
particularly in sub-Saharan Africa, must be addressed as a priority.
We expect development programmes to be reconsidering such issues
as the provision of credit and management of debt, linkages with
larger businesses, and employment and training practices, in the
light of the illness, and the absences which HIV/AIDS produces
60. We consider that multinational companies have
an obligation to assist, both directly and through Business Councils,
small and medium-sized enterprises in countries affected by HIV/AIDS.
This should include the sharing of best practice and perhaps of
certain courses and facilities. It is also necessary for national
governments and donors to have a strategy as to how to support
the informal sector and SMEs through the HIV/AIDS epidemic.
61. We also heard evidence of the likely impact of
HIV/AIDS on investment. Anglo American thought that there would
be "reduced attraction for international investment due to
increased country risk".
Furthermore, "the high incidence of HIV/AIDS in Africa reinforces
the negative perceptions which some international investors have
of the Continent, risking discouraging the private capital investment
which Africa so badly needs".
In oral evidence, Dr Brian Brink, Anglo American, identified such
a perception as "part of the education challenge. As a company
we have to demonstrate very clearly that despite the fact that
the epidemic is there ... it is still possible to run successful
businesses and it is still an attractive investment opportunity".
James Cochrane from Glaxo Wellcome had not noticed any impact
of HIV/AIDS on foreign direct investment.
Christopher Wheeler from Standard Chartered bank believed that
the businesses operating in Africa suggested "that there
are many opportunities within those countries for successful businesses
at very good margins".
62. Alan Whiteside provided two interesting case
studies of the impact of HIV/AIDS on investment. The Joshua Doore
Group, a South African based retail company, carried out a survey
of the impact of HIV/AIDS on its businesses in 1998. Their conclusions
were that the epidemic would have a significant impact on numbers
of customers as well as an effect on spending as disposable income
is reallocated. One decision they took as a result of this study
was to diversify "geographically away from the HIV/AIDS epidemic.
As a result, it has expanded into Eastern Europe and is opening
shops in Czechoslovakia [sic] and Poland".
As a second example, he pointed to Botswana where in response
to the impact of the epidemic on its workforce the country is
buying in skills, "It buys in Sri Lankans and Bangladeshis
and people from the Far East who are cheaper than people from
Europe and Asia, and it will test them before they come".
63. We suspect that few companies have as yet done
the sort of forward-thinking study conducted by Joshua Doore Group
into the impact of HIV/AIDS on their operations. It is certainly
not apparent that consideration of the consequences of HIV/AIDS
has as yet had a significant effect on investment (already pitifully
low) into sub-Saharan Africa. As the epidemic progresses and AIDS-related
mortality increases we suspect this will change, particularly
as a result of a decline in the availability of professional expertise
and shrinking of markets. The nature of the response will depend
on the nature of the business. We have seen an example of how
a retail business can diversify its activity out of high prevalence
areas. For extractive industries, on the other hand, a way round
the skilled labour shortage must be found. The bringing in of
skills from outside the country is certainly not ideal and is
not without its own danger of spreading the epidemic. It is important
to develop the skills base of developing countries. Nevertheless,
the crisis is such that less than perfect solutions are becoming
the only solution. The importing of professional expertise as
an emergency response is better than the collapse of an industry
or public service. We believe that serious international consideration
must be given to how to respond to the growing skills shortage
in countries with high HIV/AIDS prevalence. We believe systems
need to be put in place both to ensure that such skills can be
brought in readily but also that such interventions are considered
temporary and accompanied by greater investment in the education
and training of local people.
64. We do not as yet see much evidence of a diversion
or reduction of investment flows as a result of HIV/AIDS. We fear,
however, this is not a product of reflection by the financial
and business community, but rather a failure to reflect. Impacts
will of course vary according to the nature of the industry. Those
highly dependent on local raw materials will no doubt continue
where they are and cope in other ways. The concern is over the
impact of a shortage of skilled labour on any attempt by countries
in sub-Saharan Africa to enhance their productive capacity and
develop their industrial base.
65. More investment in sub-Saharan Africa is desperately
needed. We must emphasise that such investment can take place
successfully and profitably, even with an HIV/AIDS epidemic. What
is needed is an intelligent assessment by business of the environment,
and investment to be accompanied by effective prevention and care
programmes in the workplace.