Contact Us

Staff

South African firms self-impose "AIDS tax" by ignoring the disease, SPH study finds

By David J. Craig

In South Africa, where in some provinces HIV-infection rates are as high as 30 percent, corporations have been attempting for years to shake the economic burden of AIDS by cutting back on insurance benefits and hiring proportionately more temporary workers. But researchers at the School of Public Health's Applied Research on Child Health (ARCH) Project say that South African companies could slash their labor costs substantially by helping employees with the disease live longer and by taking measures to prevent new HIV infections.

Sydney Rosen, an SPH assistant professor of international health, says that South African companies would benefit financially by spending more money on AIDS prevention and treatment programs for their workers. Photo by Fred Sway

The researchers examined six large companies, five in South Africa and one in neighboring Botswana, and considered factors such as annual AIDS-related absenteeism and deaths at each company and the expense of replacing stricken workers to determine the cost-effectiveness of offering better benefits. The study, funded by the U.S. Agency for International Development (USAID), will be published early this year. Sydney Rosen, an SPH assistant professor of international health, was the lead investigator.

By calculating the intangible effects of losing even the lowest paid worker to AIDS -- such as loss of workforce cohesion and experience -- the study found that the disease adds between 1 and 10 percent to companies' annual labor costs, which the authors dub an "AIDS tax." The variation is due partly to differences in the demographics of the workforces among the companies, which include retail, mining, agriculture, heavy industry, and media firms ranging in size from 500 to 35,000 workers. Each participated on the condition of anonymity.

Companies would save money, says Rosen, if by spending about $600 a year to treat laborers and technicians with AIDS they could keep the employees working productively for six years more than they would have otherwise. In the case of supervisors or managers with AIDS, the annual treatment cost would prove financially worthwhile if such employees worked productively for just three more years. Businesses would further benefit by investing more money in prevention programs, the study says.

"Companies in South Africa and nearby countries have massive infection rates in their workforce, and if they do nothing, the future costs are potentially huge," says Rosen. "What we're trying to show them is that doing more in the way of HIV and AIDS interventions instead of sitting around and waiting for the costs to hit is a potentially very profitable investment. We've demonstrated that there has been a systematic underinvestment in interventions.

"As a public health professional, clearly I believe that these companies should be doing more [to combat AIDS]," Rosen continues. "And as an economist, I've shown that they are bound to get a pretty good return on their investment."

Because little is known about the effectiveness of many HIV and AIDS prevention and treatment programs in South Africa, Rosen admits, the study's projections about the cost-effectiveness of such measures are speculative. There are scant data, for instance, about how long antiretroviral drugs are likely to extend the lives of the country's AIDS patients.
It is clear, though, that AIDS is having a staggering impact on the South African economy. Workers in the companies ARCH examined have HIV infection rates ranging from 9 to 24 percent. In one company, an industrial firm that employs about 35,000 people, an estimated 250 workers died from AIDS in 2000 alone, and an estimated 582 became infected with HIV. Black South Africans are at the highest risk for contracting the virus, but AIDS among white South Africans, who hold most executive positions in local corporations, also appears to have reached epidemic proportions, Rosen says.

Rosen and other researchers at the SPH Center for International Health currently are launching a new study to examine the efficacy of particular AIDS prevention and treatment programs. They also plan to investigate how government agencies and smaller businesses in South Africa are dealing with AIDS among their workforce, as well as how the nation's labor unions are reacting to the situation.

"Although the companies in our study varied a great deal," says Rosen, "our work on the AIDS tax should be globally applicable because it shows the importance of companies taking a forward-looking approach to dealing with the disease."

Other ARCH staff members who worked on the study include Bill MacLeod, an SPH assistant professor of international health, Matthew Fox, an SPH statistical analyst, Jonathon Simon, an SPH professor of international health and director of BU's Center for International Health, and Donald Thea, an SPH professor of international health.

11 January 2002
Boston University
Office of University Relations