World Bank Report on AIDS, South African Economy Prompts Debate Over Foreign Investment, Antiretroviral Drug Provision

A World Bank report released last week warning that South Africa's economy could collapse in several generations if the HIV/AIDS epidemic is not addressed more urgently has "sparked a domestic furor," prompting debate over foreign investment and the government's response to the epidemic, Reuters/SABCnews.com reports. The South African government has "dismissed" the report's findings (Reuters/SABCnews.com, 7/28). With approximately 25% of South Africans ages 15 to 49 HIV-positive, the report estimates that by 2050 the per capita income per family will be half the amount it was in 1990, dropping to $12,901, suggesting that South Africa's economy could face collapse within about 90 years unless further actions are taken to fight HIV/AIDS (Kaiser Daily HIV/AIDS Report, 7/24). "What is not factored into the model is that societies change behavior -- there has been none of that in this very unfortunate scare story," Finance Minister Trevor Manuel told attendees of a seminar on Monday (Reuters/SABCnews.com, 7/28). Speaking yesterday at the Gordon Institute of Business Science, Manuel said that businesses can most effectively address HIV/AIDS by providing ongoing training on the disease, facilitating discussion about nutrition to extend the lives of HIV-positive people and "further down the line" providing antiretroviral drugs, according to Business Day (Seria, Business Day, 7/30).

Focus on 2001 Study
Government officials have highlighted the findings of a different report, which was published by the South African Bureau for Economic Research in 2001. The report predicted that annual growth would decrease by half of one percentage point each year through 2015 because of HIV/AIDS (Reuters/SABCnews.com, 7/28). The report also said that production prices could rise by up to 2.3% and prime interest rates could increase up to 2.9% per year between 2002 and 2015. In addition, the report said that by 2015, South Africa's total labor force will decrease by 21%, compared with a no-AIDS scenario, including a 16.8% decline in highly skilled workers, a 19.3% drop in skilled workers and a 22.2% decrease in semi-skilled and unskilled workers (Kaiser Daily HIV/AIDS Report, 9/26/01). South Africa currently has a 30% jobless rate.

Concern Over Investment
Local analysts said that they fear that the way in which the new report has been presented may scare away potential foreign direct investment, which currently represents less than 1% of South Africa's GDP, according to Reuters/SABCnews.com. "We think the probability of predictions of this World Bank study coming true is as high as that of the bank halving global poverty in the next two generations," Standard Bank Chief Economist Iraj Abedian wrote in a Business Day opinion piece on Monday. However, some analysts said that the report addresses for the first time the "alarming issue" of the epidemic's impact on South Africa's society and economy and that the report could put pressure on the government to provide antiretroviral drugs through the public health system. The government is examining the possibility of providing the drugs, which it previously has said are too expensive and toxic, Reuters/SABCnews.com reports. Reg Rumney, head of the independent think-tank Business Map, said, "I'm glad that the report picks up on secondary economic effects, but I'm concerned that this kind of thing will affect investor sentiment." Rumney added, "What I point out is there is a tremendous amount of uncertainty. We do know that the AIDS epidemic could have a devastating impact on the social fabric which in turn will affect the economy, but we don't know by how much" (Reuters/SABCnews.com, 7/28).