South Africa's acute incidence of HIV/AIDS is well-known globally. According to the United Nations, about 6.1 million South Africans were living with HIV/AIDS in 2012. This means that one in every six South Africans is infected and of these, 17.9 percent of individuals between the ages of 15 and 49 - considered to be the most economically productive age group - are infected with HIV/AIDS.

According to the World Bank, this high infection rate among the economically active population could, in the most undesirable of scenarios, result in South Africa's per-capita income halving by 2100. While still a few decades away, the projected adverse impact of HIV/AIDS on the South African economy has seen government embarking on the largest anti-retroviral treatment (ART) access campaign in the world.

Billion dollar HIV/AIDS budget

In South Africa, patients are only eligible for state-sponsored ART when their CD4 counts - a measure of a person's immune system (the higher the CD4 count, the stronger the immune system) - reach 350 or below. New guidelines from the World Health Organization (WHO) suggest that the threshold for anti-retroviral (ARV) therapy initiation should be increased to CD4 counts of 500 or below, targeting HIV-positive patients who seem otherwise healthy. At the parliamentary budget vote speech in July, South Africa's Minister of Health, Aaron Motsoaledi, announced that the country would adhere to the new guidelines. This has financial implications for the country: the HIV/AIDS budget will increase by 1 billion rand (about $94 million) to 13 billion rand ($1.23 billion) in order to increase the rollout of ART.

It is questionable if this budget increase (8.9 percent of South Africa's health budget will go toward HIV/AIDS) as well as the greater increased treatment threshold will be effective in curbing the HIV/AIDS pandemic and ultimately assisting South Africa toward a more buoyant growth path. Approximately, 2.5 million people, or around 40 percent of the HIV-positive population, receive ARVs in South Africa. The country will thus need to more than double the number of people receiving ARVs in order to meet the WHO guidelines of providing ARVs to 90 percent of HIV-positive patients with CD4 counts of 500 and below.

In 2013, hospitalization, primary health care and treatment cost on average $568 per patient on ART per year, with ART drugs contributing about $100 to the total. The cost for those HIV-positive patients not on ART is higher: $883 per patient per year.

The burden placed on South Africa's healthcare system by HIV-positive patients not receiving ART is substantially higher than those that are receiving treatment. Although patients receiving ART require more time off work in order to, for example, visit a clinic to receive their medication, they spend significantly less time being hospitalized than their non-ART receiving counterparts. The total cost of caring for HIV-positive people in South Africa amounted to $1.4 billion in 2013, 44 percent of which was spent on ART, including the necessary care and support. In 2000, the World Bank projected that South Africa's GDP in 2010, in a "no AIDS" scenario, would be 17 percent higher than in an "AIDS" scenario. Furthermore, the World Bank estimated that the macro-economic cost of AIDS annually would reduce South Africa's GDP growth rate by approximately 0.4 percentage points. With South Africa currently being a 2-percent (or less) growth economy - far flung from the 6 percent or more it hopes to achieve as part of its National Development Plan (NDP) 2030 - HIV/AIDS arguably makes a further dent in the country's already dismal growth prospects.

AIDS impact on business

Businesses are particularly vulnerable to the effects of HIV/AIDS. In 2005, the World Economic Forum (WEF) reported that infection among employees may add as much as 6 percent to the annual wage and salary costs of firms. WEF's 2013/2014 Global Competitiveness Report ranks South Africa in the 143rd place out of 148 countries in terms of the business impact of HIV/AIDS. HIV/AIDS leads to an increase in absenteeism amongst employees as well as a decrease in productivity whilst at the same time increasing health costs. Furthermore, HIV/AIDS robs children in child-headed households of education opportunities as they have to care for their siblings. This undermines the country's long-term economic growth prospects. Previous research has shown that the hardest hit sectors are mining, transport, financial services and manufacturing - all arguably key sectors in South Africa's future growth trajectory. For example, in 2012, it was estimated that the prevalence rate amongst miners in South Africa was nearly 35 percent.

The implementation of the new guidelines for ART will result in a greater share of South Africa's HIV-positive population being eligible for treatment from January 2015. By treating all HIV-positive patients that have CD4 counts of less than 500, it is, on the one side, estimated by experts such as Williams and Gouws from the South African Center of Excellence in Epidemiological Modelling and Analysis (SACEMA) and UNAIDS that HIV transmission will be radically reduced. Similarly, they argue that as the prevalence of infection falls, so too will the costs of providing ARTs. Thus expanding access to ART will decrease mortality rates as well as decrease the overall longer-term costs associated with treating HIV/AIDS. Furthermore, early ART prevents the onset of a number of opportunistic diseases (such as tuberculosis) often associated with HIV.

However, others have come out against the new treatment thresholds. Nathan Geffen, a member of the Treatment Action Campaign (TAC), an advocacy group that was instrumental in persuading the South African Government to implement ARV rollouts, opposes the new guidelines, arguing that a reduction in associated opportunistic diseases through the use of early treatment is likely, but not certain. Evidence for implementing ART for CD4 counts above 350 is not substantial enough to warrant the increased cost to the healthcare system. Similarly, the Southern African HIV Clinicians Society argues that the new thresholds are unrealistic, given that even at the current levels of ART penetration, a number of public health facilities experience drug stockouts. It may also lead to an increase in ARV resistance, which could then be transmitted.

 While early ART should decrease total national healthcare costs associated with HIV, the real measure of concern is that it will enable people to remain healthy for longer and to contribute more to the economy. However, substantial evidence in favor of early ART is not yet available. Until such a time and as more information becomes available, South Africa should, arguably, first focus on spending the 1 billion rand increase in the budget on providing effective ARVs for those with CD4 counts below 350. ART for all eligible HIV-positive people is a key proposal in the government's NDP 2030. That said an increase in the HIV/AIDS budget as proposed is unlikely to significantly affect the epidemic. It is estimated that up to $102 billion needs to be spent in the period leading up to 2030 if South Africa is to keep the HIV-positive population down to 5 million people. With only 40 percent of patients receiving effective ART to date, by increasing the threshold, the goalposts seem to be moving, making policymakers' dream of achieving key targets in the NDP, at least with regards to health, unlikely. CA

(Kira McDonald is a researcher at Frontier Advisory and Hannah Edinger is a director at Frontier Advisory)