USAID/South Africa, collaborating with AusAID, DFID, UNDP, UNAIDS, the EU, GTZ, the Kellogg and Wellcome Foundations and the SA private sector, has generated sound economic research on the impact of HIV/Aids on South Africa. This research has already had substantive policy impact on welfare grants, expansion of social service budgets to accommodate the impact of the pandemic, on drug prices, and on the decision to roll-out HAART treatment. In addition the research has resulted in private sector firms becoming more involved in prevention, treatment and mitigation programs.
Four years ago there was next to no good economic analysis on the impact of HIV/AIDS on South Africa and very little available on other countries in the region. The few studies that were done had seriously flawed methodology and were unable to get heard within the corridors of government. Because of USAID’s close relationship with the SA National Treasury on analyzing policy issues and USAID’s relationship with SA academic institutions we developed a research program to complement other work being done. The Australian aid institution, AusAID joined USAID in this endeavor.
The first set of 7 research papers were improvements in quality, but senior researchers were not interested in looking at how HIV/AIDS impacted their field and our ability to influence government decision making was minimal. But it was a start and the special issue of the SA Journal of Economics sparked considerable interest in showing the importance of this research and how it affected different branches of economics. For example, one of the researchers started the first panel study of the impact where he followed the same people over three years (the work is only now being completed). This provided the first data anywhere as to how HIV/Aids changes savings, investment, consumption, health care spending, migration patterns, where people are getting money, from whom they are getting health care services, and the like. Being a panel study it was able to trace the changes in spending as families went from being unaffected to affected by HIV/AIDS to death and the economic impact on other household members. Another study demonstrated the impact on small businesses and their search for cost-effective treatment.
Working separately with Boston University USAID funded the first detailed study of how the pandemic was affecting big and medium sized businesses. This study showed the extent of the impact and also the methods business was taking to reduce the impact (outsourcing, using contract labor, changing from defined benefit to defined contribution schemes). The study was so useful that it was replicated in many other countries on the continent.
We learned three important lessons from this initial work, (1) we needed to do more work inside government to get the buy-in needed, (2) we needed to interest senior researchers to get the credibility we needed and (3) we needed to improve the quality so long as junior researchers were leading the way.
USAID worked separately with the SA’s National Treasury to analyze how HIV/AIDS would impact on the SA budget. This econometric model built on the research done to show the budget implications of HIV+ patients making greater demands on the health care system (rationing was becoming a problem with HIV+ crowding out non-HIV+ patients), on the welfare system (AIDS patients getting social welfare grants that crowded out non-welfare spending), and how deaths among HIV+ teachers were increasing costs of education. As a result the 2001 Medium Term Expenditure Framework (MTEF) was the first time money for AIDS was expressly included in the budget. The model USAID helped develop used top SA researchers and the positive press convinced many senior decision makers that there was indeed a problem that would affect them.
In the next iteration, the UK’s aid institution, DFID, joined the consortium and the Kellogg Foundation provided additional support for administrative oversight and technical assistance from the US.
This iteration, whose papers will be presented in final form in November 2003, included detailed analysis of the impact on people living in Soweto, on universities and separately on the school system, on welfare payments, on local government finances, etc. We added technical assistance to all the contracts to improve the quality and thus expanded the credibility of the results.
In the third round which is only now being contracted, the UNDP/UNAIDS and the Wellcome Foundation joined the consortium as did SA private sector firms needing the results.
Separately from the consortium, USAID/South Africa was asked by National Treasury to analyze the cost of AIDS drugs. The resulting study, done by a student USAID had sent to the US for a doctorate, showed the validity of the claim that AIDS drugs were 2-10 times higher in SA than elsewhere. Subsequent negotiations with the drug firms resulted in their lowering prices to be closer to world levels. The data also fed into separately-funded work by the US Federal Trade Commission on anti-competitive behavior of drug companies in SA. As a result, GSK reduced some of their prices by 90%. Cabinet asked USAID/South Africa to assist in analyzing the economic implications of the proposed roll-out of HAART treatment. The results showed that not only was the expenditure on treatment good for the economy, but that it was affordable to the treasury.
USAID/South Africa is also funding work by BU analyzing the cost effectiveness of different approached to treatment to reduce the costs while increasing the quality.
Treatment of HIV cannot be done effectively without (1) analysis of the cost implications, (2) monitoring what is cost effective, (3) knowing the impact on national, provincial and local government budgets, (4) knowing the characteristics of the people affected, and (5) looking at how to deliver welfare checks to mitigate the impact. These expenditures of a few hundred thousand dollars improve the effectiveness of government’s billion dollar expenditures.
