HIV/Aids in the Steel and Engineering Industry:

The implicit consequences of the HIV/Aids pandemic require a strategic response from top management, intensive planning and immediate action to minimise the impact on companies, the sector and the economy.

It has been estimated that 40% to 50% of the current South African workforce will die of Aids within the next ten years.

According to the 2003 UNAIDS report, more than five million South Africans are estimated to be HIV infected - almost 25% of working age South Africans. This number could reach 10 million by 2010.

$70 billion lost

This makes South Africa the worst affected country in the world and it is estimated that the South African GDP could be reduced by more than 17% by 2010 as a result of the disease. These estimates are corroborated by a recent report released by the International Labour Organisation (ILO), which estimates that HIV/Aids cost our economy more than $70 billion between 1992 and 2002, mainly due to deaths and absenteeism.

The sheer scale of the pandemic will affect entire nations and economic systems, as the effects filter through to economic growth, income levels and poverty levels worldwide. These effects include straining governments’ social and healthcare systems, decreased industrial productivity, an overall decline in consumer demand, and depressed foreign investment and tourism.

Profits squeezed

In June, the Global Economic Initiative of the World Economic Forum released survey results which found that almost 66% of the 1 620 African businesses surveyed believed that HIV/Aids would affect their bottom line. Most reported already seeing the negative effects of HIV/Aids, including higher costs relating to absenteeism and healthcare, higher operating costs and, in some instances, even a reduction in revenue.

Recent research conducted by the Bureau for Economic Research on behalf of the South African Business Coalition on HIV/Aids (SABCOHA), showed that almost 33% of the 1 006 companies surveyed said that their profitability had been negatively affected. A further 43% of the companies expected a ‘significant adverse impact’ on their operations and profits within five years. The companies surveyed operate in the manufacturing, construction, motor, wholesale and retail sectors.

Small businesses are perhaps more at risk as they lack the resources to respond comprehensively to the issue. According to the SABCOHA research 30% of small companies reported adverse effects on profits due to HIV/Aids.

The impact on Human Resources

The SABCOHA research report revealed that over 33% of companies experienced reduced productivity or more absenteeism. Nearly 40% reported an increased demand for labour as they required replacements for employees who were sick. Less than 15% said they were addressing the problem by investing in machinery or equipment to reduce labour dependency.

Increase in sick leave and absenteeism

According to a USAid publication, a sugar mill in South Africa, with an infection rate of 26% of tested workers, reported that infected workers incurred, on average, 55 additional days of sick leave during the last two years of their life.

Additional leave days will also be required for uninfected employees to attend funerals, take compassionate leave and care for HIV+ family members.

This places additional pressure on the rest of the employees who will carry the workload of their absent colleagues. The resulting overtime, exhaustion and stress could lead to reduced job satisfaction and productivity.

Productivity

Employees living with HIV/Aids may be less productive due to ill health. Even in good health, these employees are likely to experience the stress of living with HIV/Aids, discrimination and uncertainty.

The productivity of uninfected employees could suffer indirectly, as they struggle to deal with the emotional strain caused by HIV/Aids illnesses and deaths among their colleagues and families.

This stressful environment can damage staff morale. Discrimination against employees living with HIV/Aids may destroy company cohesion and teamwork. A lack of management response could be perceived as a lack of caring - a serious threat to labour relations. It is vital that management respond decisively and humanely by implementing and actively managing HIV/Aids policies.

Recruitment and experience

Recruiting new employees may become increasingly difficult as the supply of skilled labour is affected by HIV/Aids, which occurs predominantly in the working age group. Perhaps this is not yet a problem for semi-skilled or unskilled labour, but some companies have already been forced to find expensive foreign management expertise as the disease compounds the lack of skills in South Africa.

The recruitment process and training increase costs, while also placing additional strain on the employees who must assist new employees during their training and learning curve.

The constant stream of new employees disrupts the continuity of the workflow process and destabilises the balance between new, inexperienced employees and experienced employees. A great deal of unspoken ‘know-how’, institutional memory and company specific experience is lost.

Costs and profitability

Increased costs in other related areas are certain. For example, the costs of medical aid and health insurance, group life and disability insurance, employee benefits and pension fund contributions, funeral expenses and severance pay, will increase as the effects of HIV/Aids are felt in the company and the economy.

Further costs relate to management and staff resources, and direct costs, involved in planning, implementing and participating in HIV/Aids prevention, training and treatment.

Yet, as companies add up these costs, research suggests that not responding could be the most expensive option.

The market

The ILO research report states that HIV/Aids will also affect the markets in which companies operate and will impede economic growth as inactive households increase and savings decrease. “Over time reduced rates of savings lead to diminished investment, slower growth in productive output, constraints on employment and the likelihood of impoverishment.

According to the SABCOHA research, around 10% of the companies surveyed reported that their sales had been negatively affected, while 30% expected to see an adverse effect on sales in the near future.

A USAid publication states that ‘HIV/Aids is known to be a disease that tends to impoverish families’ often because infected individuals are often the main income earners in households. Therefore, families earn less, carry higher healthcare expenses and have little resources left to buy anything but essential items. The effect will be a decline in demand for most products, especially ‘luxury’ goods.

New products and government contracts

Sanlam says that companies “will be challenged to minimise the effects of HIV/Aids on profits. For example, new products will have to be developed, while at the same time ensuring that the Aids epidemic does not erode [the] client base…

“Perhaps most importantly, the South African government has increasingly indicated its intent to request HIV/Aids strategies, policies and interventions for all companies wishing to tender for new government and parastatal contracts. Similarly, companies wishing to renew existing government and parastatal contracts may be asked for their HIV/Aids interventions. Finally, in an increasingly competitive market, clients' perceptions around companies' attempts at combating the HIV/Aids epidemic could be important.”

Corporate governance and reporting

Companies are being pressurised by stakeholders, including current and potential investors, employees, labour unions, government and communities, to report on the effects of HIV/Aids in the workplace, the costs involved and the strategies implemented to manage the issue.

The Global Reporting Initiative has developed a resource document for reporting on HIV/Aids, to be included in companies’ customary annual reports, creating an internationally accepted and credible benchmark for comparing companies’ performances. The HIV/Aids reports are envisaged to include performance indicators focussing on issues such as strategic planning, risk management, and HIV/Aids programmes.

Reporting in SA

This trend is echoed by the 2002 King Report on Corporate Governance for South Africa which underscored the importance of annual corporate reporting on HIV/Aids.

Yet, reporting on HIV/Aids issues remains voluntary. Other organisations that advocate reporting on HIV/Aids issues include the South African Institute of Chartered Accountants, which developed a framework for effective reporting, and the JSE, which launched a corporate social responsibility index in May.

The ILO Code of Good Practice and the South African Code of Good Practice on Key Aspects also advocate regular monitoring and review of HIV/AIDS programmes.

The HIV/Aids pandemic is a challenging issue facing companies, but with strategic planning and strong top management leadership, the impact of HIV/Aids can be minimised and managed.

In the next issue, we will look at the current situation companies face – their rights, the rights of their employees and other stakeholders, as well as the legal implications of HIV/Aids in the workplace.