HIV/AIDS, growth and poverty in KwaZulu-Natal and South Africa:

HIV/AIDS, growth and poverty in KwaZulu-Natal and South Africa: an integrated survey, demographic and economy wide analysis.

This paper estimates the economic impact of HIV on the KwaZulu-Natal province and the rest of South Africa. Thurlow et al extended previous studies by employing: an integrated analytical framework that combined firm surveys of workers’ HIV prevalence by sector and occupation; a demographic model that produced both population and workforce projections; and a regionalized economy-wide model linked to a survey-based micro-simulation module. This framework permits a full macro-microeconomic assessment. Results indicate that HIV greatly reduces annual economic growth, mainly by lowering the long-run rate of technical change. However, impacts on income poverty are small, and inequality is reduced by HIV. This is because high unemployment among low-income households minimises the economic costs of increased mortality. By contrast, slower economic growth hurts higher income households despite lower HIV prevalence. They conclude that the increase in economic growth that results from addressing HIV is sufficient to offset the population pressure placed on income poverty. Moreover, incentives to mitigate HIV lie not only with poorer infected households, but also with uninfected higher income households. Their findings reveal the substantial burden that HIV places on future economic development in KwaZulu-Natal and South Africa, and confirms the need for policies to curb the economic costs of the pandemic.

This macro-microeconomic assessment of the present and future impact of HIV on the KwaZulu-Natal economy used survey data on HIV prevalence among managers, skilled workers, and labourers in 15 companies across four sectors: agriculture, manufacturing, tourism, and transport sectors. These findings were used to calibrate a demographic model and then its projections were imposed on a dynamic computable general equilibrium model linked to a household-survey based micro-simulation model. Sound complicated? Yes, it definitely is, however this approach integrating demographic, economy-wide, and survey-based models produces striking estimates. The Gross Domestic Product (GDP) growth rate in KwaZulu-Natal is lowered by 1.6% per year and although that does not sound like much, it results in an economy that would be 43% smaller in 2025 than it would be in the absence of HIV. These are the kinds of results that policy makers understand and that can motivate them to mobilise investments to curb HIV transmission and improve treatment access.