The social and economic impact of HIV/AIDS cannot be overstated. If unchecked, it is an epidemic that can destroy a whole generation. It destroys the human capital of a society that is desperately required for development. It weakens our social and economic institutions. It could obliterate the family as an important institution as more and more children become orphans. It has serious negative effect on economic performance both by affecting the overall output of a country and by making the cost of business prohibitively high.

If we look at the global picture, there were some 33.4 million people estimated to be infected by the virus at the end of 1998. Of this total number, 22.5 million (67.4%) are in Sub-Saharan Africa, 6.7 million (20.1%) are in South and South East Asia, and 1.4 million (4.2%) in Latin America. The rest of the world combined accounts for only 2.8 million infected or about 8.4% of the total. If we look at the trend in new infections, SSA’s picture looks very grim in deed. Of the 5.8 million people newly infected through out the world in 1998, 4 million (69%) are in Africa. (See table 2 in appendix)

As intimated earlier, Africa is the most affected continent in the world. Within Africa, South Africa with 4.2 million affected leads the pack followed by Ethiopia with 3 million (of which 2.9 million are adults) and Nigeria is third with 2.7 million people infected. (See table 1 in appendix). The number of children orphaned at age 14 or less is highest for Uganda where the virus struck earlier with 1.7 million orphans followed by Nigeria with 1.4 million and Ethiopia is third with 1.2 million orphans. However, partly owing to the low level of income and the weakness of our health infrastructure, the number of people dying from the disease is the highest in Ethiopia compared with other African countries. In South Africa, where there are the highest number of people infected, the death to infection ratio is about 6% (with an estimated 250,000 people dead in 1999). In comparison, the ratio for Ethiopia is 9.33%, (which is more than one and half times that of South Africa. The cumulative number of AIDS deaths in Ethiopia since the epidemic struck in the early 80s is conservatively estimated at 1.2 million and expected to increase to 1.7 million by the year 2002. This is about 6.4% of the total AIDS deaths in the world for a population a little less than 1% of the world population. If present trends continue (i.e. using the low prevalence estimate of the government) Between 2002 and 2014, an additional 3.35 million Ethiopians are expected to die from the disease raising the cumulative number of people that will die of AIDS to 5.25 million people by 2014.

One obvious implication of this is a significant decline in the life expectancy of the average Ethiopian. The life expectancy at birth is currently estimated by the Central Statistical Authority to be about 50 years without taking into account the effect of HIV/AIDS. "However, due to the large number of infant, children and young adult deaths due to AIDS, it may only be about 42 years." By the year 2014, the life expectancy that would have been 56.4 years without AIDS is expected to reduce to only 46.5 years owing to the HIV/AIDS pandemic. AIDS is also claiming the lives of children at an alarming rate. The infant mortality rate, expected to decline from the current 97 per 1000 live birth to 79 by the year 2014 without AIDS will increase to 85 because of it while child mortality rate will be 147 because of the disease from the expected 127 without the disease. According to the Ethiopian Ministry of Health, "AIDS could soon become the major cause of death for children under the age of five, worse than other major causes such as diarrhea and respiratory diseases." The total population of the country that could have been 92 million by 2014 will only be 85 million because of the disease.

The epidemic is having a strong and negative impact on the health sector of the country particularly given the government’s weak financial capacity. According to a study by Kello, the cost of hospital care for an AIDS patient ranges from birr 425 to 3140 for an average of birr 1800. The total cost of caring for AIDS patients, according to government estimates is about 87 million birr in 2000 expected to rise to 185 million by the year 2014. According to UNAIDS, if Ethiopia is to adequately care for all the AIDS patients the required health expenditure will rise by 74 to 121 million USD. This is an additional 3 to 5 dollars in per capita income that the country does not have and need to get from foreign sources. Currently, as much as 42% of all the country’s hospital beds are occupied by AIDS patients and this is expected to rise to 54% by the year 2004 leaving only 46 % of the beds for all other afflictions in the country. Given the wide spread occurrence of other epidemics such as malaria in the country and the miserable condition of the country’s health sector, it is not difficult to imagine the potential increase in mortality caused by other diseases because of the suffocation of the health care system by the HIV/AIDS epidemic.

The epidemic also affects the education sector. It does so by, among other things, the increase in the number of teachers that die of the disease and/or by the rate of absenteeism of infected teachers. A rough estimate of the size of this is given by the percentage of primary students that have lost a teacher because of AIDS. As can be seen from table 1, the highest rate (3.9%) is in Botswana mainly because of the high adult prevalence rate (35.8%) followed by Kenya and Uganda at about (1.6%) where the epidemic started earlier than Ethiopia. The rate for Ethiopia is a significant 1.17-%. That is 51,000 primary school pupils out of 4.3 million that have lost teachers for AIDS in 1999. For a country that has a serious shortage of trained and experienced teachers, it will neither be easy nor cheap to replace these teachers.

As suggested earlier, HIV/AIDS is no more just a health and humanitarian crisis. It has become a monumental development problem through its negative effects on a country’s economy. There are various ways through which it affects the economic performance of a country. At the macroeconomic level, it reduces total output and is potentially inflationary. It negatively affects government budget by increasing its expenditure for healthcare and reducing revenues owing to the reduction in output. The foreign exchange position of the country is also affected because of the high forex demand to purchase medicine and related products. The increased AIDS related expenditure also reduces national savings and thus investment. At the firm level, the epidemic could affect business by increasing the cost of doing business through increased labor costs, loss of trained human manpower, reduced productivity and absenteeism. It also affect business on the demand side by reducing the demand for goods and services that they produce owing to the overall decline in output and expenditure shifting as household expenditure for health care and funerals increase at the expense of other spending.

UNAIDS projections show that the per capita income growth of Ethiopia will be reduced by 0.6% by the year 2010, which is the lowest by comparison with the selected African countries reported in table 1 and much lower than the average SSA country in general. Still, this is a significant loss for Ethiopia. According to our simple projection, (see tables 3 in the appendix) this amounts to a loss of 60 birr in per capita income by the year 2010 amounting to over 4.8 billion birr in total income. It is expected that Ethiopia will lose 8.3% of its potential workforce in 2005 and 10.5% in 2020. The loss of workforce could reach 2.45 million if we take the government’s conservative projections or could rise as high as 2.7 million if we use UNAIDS’ prevalence rate as a base. With a mean expenditure for treatment of birr 1930 and funeral expenses of birr 327, (several times more than the average income of most households) it is not difficult to imagine the reduced national savings owing to AIDS. This would certainly lead to a reduced investment thus reducing economic growth. In terms of foreign exchange allocation, if the country spends the required amount of money to import drugs to treat all AIDS patients; it could spend from 7 to 37 weeks worth of all its forex quota in 1994. This is a foreign exchange that the country could ill afford.

Although there is no detailed data for Ethiopia, the disease affects areas critical to our economy its potential for development. According to recent surveys of some African countries, thirty percent of Malawi and Zambian teachers are infected for example and in many African countries the disease hit professionals hard. A 1997 study in Rwanda showed that "the likelihood of HIV infection for a pregnant woman to be 38 percent if her husband worked for government, 32 percent if he was a white-collar worker, 22 percent if he was in the army and 9 percent if he was a farmer." As in other African countries, AIDS affects the various sectors of the Ethiopian economy differently. According to a 1994 survey, the mean number of hours spent per week in agriculture per household was found to be 33.6 hours in non-AIDS afflicted households, as compared with between 11.6 and 16.4 hours in those that were afflicted. The urban economy is the most affected currently owing to the high prevalence rate in urban areas (13.4% for urban areas in general and 16.8% for Addis Ababa) compared with rural areas (with 5% adult prevalence rate). Within the urban economy, following the transportation sector (because of mobility) and the insurance sector, the industrial and services sector will be highly affected.

In today’s very tight competitive environment, businesses need to do whatever they can to reduce cost to stay competitive. They certainly have to avoid any thing that could potentially raise their cost. From the experience of many African countries, it has been shown that the epidemic can seriously raise the cost of businesses directly. One such direct effect is the loss of skilled and experienced workers including senior staff which, both reduces productivity and increase the cost of training new recruits. Productivity of enterprises is also affected by absenteeism owing to illness or attending funerals of relatives or fellow workers. In a 1994 survey of 15 firms in Ethiopia, AIDS accounts for 53% of all incidences of illness over a five-year period. According to the Ethiopian Ministry of Health, "the number of workdays lost to illness for a person with HIV/AIDS can range from as little as 30 to as many as 240 days in a year." UNAIDS estimates that HIV will result in a fall of productivity to reach as high as 50% in the next five to ten years. Another direct cost to business is the cost of health care. In Zimbabwe, for instance, insurance premiums generally doubled between 1996 and 1998 while a flower company in Kenya reported that its health care costs rose ten times between 1985 and 1995. The costs of HIV to 5 firms in Botswana is estimated to rise 7 times between 1996 and 2004 to equal 5% of the total wage bill. An average Zimbabwean worker spends ten percent of his working time for funeral. All this adds significantly to the cost of the business firm negatively affecting its competitiveness.

Business bottom line is affected not only on the cost side. Its profits also suffer for lack of demand for their products. Demand is affected both by reduced income of households and because of expenditure switching. The reduced income of households can be captured at the macrolevel by the decline in GDP owing to the epidemic. As stated earlier, the total income loss assuming a 0.6% percapita GDP growth reduction, could be close to 5 billion birr per year in 2010. In terms of expenditure shifting, the loss of demand for Ethiopian businesses (other than those related to healthcare and funerals) is estimated at about 4.1 billion birr for medical care and 688.5 million birr for funerals over the next ten years. This comes to an annual average cost of health care and funerals of over 475 million birr. According to one study, the expenditure on normal goods and services of households in which someone is suffering from AIDS is often halved. As a Thai businessman succinctly put it "dead customers don’t buy."

All these combined could reduce the profitability of business significantly. Although there is no such calculation for Ethiopia, if we take the experience of other African countries, the loss in profitability could range from as little as 0.5% in the less affected industries such as textiles to as high as 15% in the highest affected transportation sector. (See graph in appendix).

Albeit scanty, the above evidence clearly indicate that businesses in Ethiopia, like all businesses in most affected countries in Africa, have a clear business interest to be engaged in the fight against HIV/AIDS. Although many businesses do not see the direct effect of the disease now, if current trends continue or get worse for lack of a concerted action, their bottom line is sure to seriously suffer in due time. As the competition gets stiff and the global economy gets more and more knowledge intensive, no country or business can afford to lose its professionals, teachers, managers or other skilled personnel at such a high rate and hope to survive let alone emerge victorious. Therefore, for the Ethiopian business community self-interest alone demands, even requires its constructive engagement.

However, the self-interest of business in general is not measured only by the short-term cost benefit calculus of the individual firm. The overall socio-economic environment on which business activity is conducted has a crucial bearing on its profitability or even survival. One such environment that is seriously threatened by the HIV/AIDS pandemic is social stability. The tremendous burden put to bear on the country’s health care system, the massive number of AIDS orphans that are sure to be added to the army of street children in our cities, the decline in our education partly owing to the loss of many experienced teachers, the erosion of our value system as a result of the obliteration of families, the weakening of our defense forces because of the high prevalence of the disease in the military, added to the overall economic decline expected to come as the disease takes its toll all add up to erode the social fabric that has woven us together as a community. This atmosphere could seriously threaten our social and political stability that is so necessary for business to flourish.

But, that is not the only reason why businesses have to be involved. There is compelling moral and citizenship reasons that justify business involvement. After all, business owners and managers are human beings endowed with feelings and concerns for their fellow humans. Any natural disaster that strikes human beings anywhere must surely engender their sympathy and provoke action. That is why, although the size and modality of the responses differ, all of us (irrespective of our religious or nationality differences) feel the pain of a natural calamity that befalls humans anywhere. It is the inherent moral obligation of our existence that triggers such sympathy. It is also to this universal moral obligation that we appeal when we ask the support of other well-endowed countries during natural disasters in our own country or the indignation we feel when such support is denied for political or other reasons.

This moral obligation is even more compounded when the calamity occurs in ones own country. Here the universal moral requirement becomes even more forceful because of the sense of community one shares as a citizen of a country. Being a citizen of a country bestows on the individual certain privileges and responsibilities that non-citizens do not have. The right to freely trade in ones country comes with the responsibility to pay taxes and to play by the established rules of the game. The right to choose our leaders or aspire to any public office within our country comes with the obligation to use our votes properly as voters or commit our selves to genuine public service if elected. The strong case for a free market system is made on the basis of the wider benefits it accrues to the larger community. It is therefore legitimate to expect businesses to give back to the community in times of hardship some of the excess resources they are privileged to accumulate in good times.

If the above argument is somewhat valid, the question to address then is why the business community fails to get actively involved in the fight against AIDS. There are two plausible, albeit not justifiable, reasons for that. The first reason is directly related to the epidemic itself. Most business leaders do not seem to have realized the magnitude of the problem and its potential consequences. This is true not only to Ethiopian business but also businesses in other parts of Africa. According to a survey compiled for the Africa Competitiveness Report 2000, in a "comparison between perception of business and the best scientific estimates of infection rates and AIDS deaths, business leaders tend to perceive HIV infection levels to be lower than those recorded by UNAIDS...The average ACR figure (calculated as a population weighted average for the 29 countries where UNAIDS data are available) is 4.26 percent against a UNAIDS average of 6.16 percent." This is a sizeable difference especially when considering the fact that the survey was done in 1999 while UNAIDS estimate was for 1997. This gap between scientific estimates and business perception is even wider for Ethiopia. As can be seen from table 4 in the appendix, UNAIDS adult prevalence rate estimates of 9.31% and 10.63% for 1997 and 2000, is more than three times the 3.02% business leaders estimate to prevail in the work force. One reason for this divergence could be a difference in the prevalence rate of adults in the general population and that of the work force. However, according to the ACR analysis, "there is also evidence to support the view that these ACR figures reflect a degree of denial" among the business community. This is partly an indication that "the full fury of the epidemic has yet to be felt and that business leaders are unaware of this." If the latter has some truth, one of the important tasks of those already involved in the fight against HIV/AIDS is to double their efforts to raise the awareness of the business community on the current status and future implications of the epidemic.

In the Ethiopian case, there is also a more general problem that afflicts the business community when it comes to active participation in the affairs of the larger community namely apathy. Save for issues that narrowly concerns their own businesses directly or in exceptional cases where the country’s sovereignty is threatened by outside forces, the Ethiopian business community is very shy in making its presence felt in the broader concerns of the society. This is true both in areas it considers political (peace and stability, democratization...etc.) and activities that it presumes are relegated to the state (cleaning streets or neighborhoods for example). This is a trend that damages the credibility and respectability of business in the society. On the other hand, this is a trend that hurts society by robbing it of the skill and resources that the business community posses and that the community can use for the overall advancement of society.

If the case for the involvement of the business community is plausible, the next step is to identify the modality of its participation. Clearly, the responsibility to contribute towards the struggle against this epidemic should be equally shared by all members of the society. Effective struggle requires identifying the comparative advantage of each sector of the community for optimal use of the available resources. In general, it is fair to say that businesses are well placed to join the fight against AIDS either by themselves or in cooperation with the public sector and/or with non-governmental agencies active in the fight against AIDS.

In this regard, at least four areas can be identified for business participation in the prevention of the spread of the epidemic and in contributing to the care of the already afflicted on the basis of the successes registered in other countries. These are:

1. Since heterosexual intercourse is known to be the main transmission mechanism of the HIV virus in Ethiopia and condoms are known to be at the heart of an effective prevention strategy, businesses can use their experience in promoting their products by introducing innovative marketing tools for the promotion and marketing of condoms and other mechanisms of safe sex.

2. Business marketing skills can also be used in identifying tools for targeting highly affected groups in the community such as the youth.

3. Businesses can take a number of work place actions to safeguard their own employees from the disease and contribute to the care of affected workers. This could be done through work place preventive educational programs and instituting strong measures against stigmatization of affected workers.

4. Businesses can also use their tremendous financial resources and extensive contacts in government to lobby for an effective AIDS policy in the country and participate in mobilizing the larger community for preventive action, contributing towards the care of orphans and the loving care of those afflicted by the disease.

Without a doubt, HIV/AIDS is one of the most serious humanitarian and developmental challenges facing the country today. By the total number of infected persons, Ethiopia is only second to South Africa in the African continent, which is by far the worst affected region in the world. There is no person in the country that is not affected by the scourge in one form or another. The disease has killed many times more compatriots than all the wars this country has fought against foreign aggression in this century combined. The struggle against this epidemic requires the combined efforts of the government, non-governmental organizations, professional associations, the donor community, and all citizens of this country. Businesses in particular have both the self-interest and moral duty to contribute to the struggle against this epidemic. They also have the skills and the means to make an effective and durable contribution. HIV/AIDS is not a mysterious punishment that is handed down by some super natural force. Its causes are known and, although the cure is not yet available, there is sufficient and widespread knowledge about the actions that need to be taken to prevent its transmission. Neither is it a problem that goes away if ignored. It needs concerted action to mitigate its disastrous effects. It is high time that the Ethiopian business community wakes up from its slumber and proves that it is a good citizen of this community by making its human and material resources available to fight this scourge of the century.