The Business Response to HIV/AIDS: Impact and lesson learned

ii. Increased organisational disruption
The high rates of morbidity and mortality from HIV/AIDS generate increasing disorganisation within
the workforce as a result of rising staff turnover, loss of skills, loss of tacit knowledge (gained from
experience of both the work and company environment) and declining morale. These are essentially
invisible costs that are difficult to calculate but have an enormous influence on productivity. Loss of
skills from the workforce is the most obvious and often cited disruption with clear resultant training
costs. However, this disruption is compounded by a loss of tacit knowledge of the specific professional,
social and cultural working environments. These losses of intellectual capital have become increasingly
important with the progressive changes in the way companies are valued; strength of intellectual capital
is becoming increasingly important relative to financial capital.
Transmission of skills and knowledge becomes more difficult with high levels of staff turnover, and
morale can be severely affected by the loss of colleagues, discrimination against people living with
HIV/AIDS and the disruption of work activities. These less visible organisational factors are built up
over longer time frames and are critical for a more efficient, effective and ultimately productive
workforce. In smaller companies the effects of these losses are amplified. For these reasons, even in areas
of high unemployment that potentially provide a sizeable labour pool, the loss of both visible and
invisible skills and knowledge offer a significant rationale for responding to the threat of the impact of
HIV/AIDS in the workplace.
B. Increased costs
Rising production costs for business not only have the effect of directly impacting on current profit
margins but also on future profits by reducing the investment capacity for increasing productivity,
expansion, research and development, and workforce training and support. As can be observed from
Figure 4, HIV/AIDS increases costs in a number of ways:
i. Recruitment and training: demand for recruitment and training rises as a result of increased staff
turnover and loss of skills. This may include employing extra labour to cope with staff fluctuations
and losses, widening the skills base through multi-skilling and succession strategies and extensive
human resource monitoring. In addition, within a situation of scarcity of skilled labour this not only
increases training costs but also may result in demands for higher wages.
ii. Insurance cover and pensions: company life insurance premiums and pension fund commitments
will rise as a result of early retirement or death. This is particularly problematic in the more advanced
economies where such benefits are more comprehensive. For example, in Zimbabwe, over a two-year
period, life insurance premiums quadrupled as a result of HIV/AIDS.5
iii. Health management: where health care is provided these costs can increase significantly with rising
HIV/AIDS rates. A study of a commercial agro-estate in Kenya showed that medical expenditure as a
result of AIDS rose to over 400 percent above that of projected expenditure without AIDS, as shown
in Figure 4. These increasing costs may ultimately affect the level of benefits that a business is able to
provide for its workforce. However, the provision of health care is not just a cost but is also an
investment, preventing or limiting sickness/absenteeism and controlling workforce health risks. This
is particularly relevant in countries where public health care provision is limited and private health
care expensive.
iv. Funeral costs: considerable costs can be added where businesses provide for the funeral costs of
employees. This practice is particularly prevalent in many parts of sub-Saharan Africa. These
increased funeral costs are primarily a result of the high mortality rate of HIV/AIDS, particularly in
developing countries. For example, Barclays Bank in Zambia experienced a rate of AIDS-related
deaths of 36 out of 1600 employees, a rate ten times the death rate in most US companies.6

16 THE BUSINESS RESPONSE TO HIV/AIDS: Impact and lessons learned