The National Treasury proposed 20% tax on sugary soft drinks derives from the National Department of Health strategy to reduce obesity. It is rooted in the scientific consensus that these kinds of drinks are a key factor behind rising obesity and the attendant ailments of diabetes, heart disease and some cancers.
The makers of sugary soft drinks have reacted to the proposed tax with an aggressive attack that contends, among other things, that the tax will lead to massive job losses.
This brief weighs up the arguments by the Beverage Association of South Africa, and finds serious flaws in the data behind them.
Read online: Debates on the sugar tax
The adverse micro- and macroeconomic impacts of the HIV and AIDS epidemic is relatively well documented. With the advent of the free provision of antiretroviral treatment (ART) in the public sector, the focus in research on the economics of HIV and AIDS has shifted toward determining how ART may ameliorate the adverse economic impacts of HIV and AIDS. This paper investigates trends and transitions in labour market outcomes using data from a cohort study of patients enrolled in the Free State province's public sector antiretroviral treatment programme during the initial phases of the ARV roll-out. Particular emphasis is placed on the role of treatment dynamics as determinants of observed labour market outcomes, including transitions into and out of the labour force and into employment. Face-to-face, semi-structured interviews were conducted with a total of 254 randomly selected adult public sector ARV clients over the period 2004-08. The dataset includes a total of 1 844 observations, with 195 clients interviewed in all six survey rounds. Following a descriptive analysis of key treatment and labour market outcomes, econometric tools for panel data are employed to investigate how treatment duration and other aspects of treatment dynamics impact on observed labour market outcomes. For comparative purposes, these observed labour market outcomes are compared to those recorded in the general South African and Free State populations during the 2004-07 Labour Force (LFS) surveys as well as those observed among a group of almost 700 ARV clients enrolled into the Free State public sector ART programme in 2007/08. Preliminary results suggest that labour force participation, unemployment and labour force absorption rates among ART patients rise rapidly following positive response to treatment and correspond to levels of labour force participation, unemployment and labour force absorption observed among the general population. As such, universal access to antiretroviral treatment promises to play a significant part in curbing the negative impacts of the HIV and AIDS epidemic on the South African economy.
The models measuring the macroeconomic impact of HIV/AIDS are heterogeneous : each one relies on a specific theoretical background. Nevertheless, there are, at least, three main common limits to those approaches : the authors concentrate on the impact on the labour market ; they neglect the potential implications on the capital market ; and they do not model some essential microeconomic impacts such as the change in the agents economic behaviour. More specifically, the analysis of the impact of HIV/AIDS on savings takes into account direct costs such as health expenditures, seldom indirect costs like the anticipation of funeral costs and they do not model differed indirect costs. The paper proposes an analysis of this last kind of implications through the impact of the epidemic on the saving behaviour. This paper focuses on the uncertainty of life expectancy and is based on two frameworks: the Gali (1990) model which considers the life cycle theory with a finite horizon at the aggregate level and the Moresi (1999) model which species a peculiar consumption utility function through uncertain lifetime. The calibration and simulations of our model reveal a significant drop in the future saving rate in South Africa under the hypothesis of a virus evolution similar to the one given by the UN Population Division: the saving rate in 2015, under those hypothesis, should be at least 5 percentage points inferior to the estimated saving rate that would then prevail in the absence of the epidemic.
There is significant consensus that unemployment and more generally, exclusion from the labour market,is the central socio-economic problem in South Africa. Joblessness is strongly implicated in such socio-economic problems as crime, poverty, alcoholism, HIV-AIDS, and even poor educational outcomes and low skill levels (see for example Bhorat etal.2001; Fryer and Vencatachellum, 2004; Nattrass, 2003).The literature flowing from household survey data has however tended to confine itself to measuring unemployment and its consequences. In doing this, it tends to treat unemployment as something that happens to individuals and communities. However, factors such as unemployment and poverty will have obvious feedback effects on the current capabilities of individuals, on the intergenerational transmission of capital (and especially human capital) and on social and market structure. Below critical threshold levels, such factors can generate market and coordination failures. The distortions generated by unemployment can become endogenized in the sense that they become part of the cause of unemployment. To date, there is no clear understanding in the South African literature as to whether such endogenous factors are important and how they interact with other factors such as so-called imposed distortions (caused, for example by labour legislation and union wage premia) and other macroeconomic causes of unemployment.Section 2 sets out the theoretical case in slightly more detail.
There are two major economic and social security challenges facing South Africa: addressing large-scale unemployment and the AIDS pandemic. As of 2003, an estimated 14% of all South Africans were HIV-positive, with over a thousand people dying each day of AIDS. According to the government household and labour-force surveys conducted from the mid-1990s onwards, about a third of the labour force is without work (Nattrass, 2000a). This amounts to about 4.7 million people and it is, without question, a socio-economic crisis of major proportions. The life-chances and living-standards of entire households are compromised when working-age adults cannot find employment (Seekings, 2003b). Households burdened by AIDS are in an especially difficult position (Desmond et al 2000, Steinberg et al 2002a, 2002b; Booysen, 2002; Booysen et al, 2002).
Addressing AIDS and unemployment poses major challenges for social solidarity in South Africa. Over the past decade, the labour-market and industrial-policy environment has benefited relatively high-productivity firms and sectors (Nattrass, 2001). Business thus had strong incentives to reduce dependence on unskilled labour, and once the price of highly active antiretroviral therapy (HAART) started to fall from 2001 onwards, to supply it, either directly or indirectly through medical aids, to their increasingly skilled workforce (Nattrass, 2003). Those without jobs had neither access to earned income nor life-prolonging medication.
In August 2003, the government signalled its in-principle support for the provision of HAART in the public sector. Many unemployed people with AIDS will thus be able to access treatment, although this will depend on the scale and pace of the roll-out. A full-scale treatment intervention which reaches all who need it is feasible, but will require a substantial commitment of resources (Geffen et al, 2003). If resources are not to be directed from other priorities, the cost burden will fall on income-earners in the form of higher taxation. Given South Africa's high levels of unemployment, this means that the burden of providing treatment for all will fall on a relatively small pool of income-earners.
Under these conditions, employers and workers may calculate that they stand to benefit more from a more limited (and less expensive in terms of increased taxation) public sector treatment intervention, than a programme providing universal access. Two out of the three leading South African macroeconomic models predict that the pandemic will increase per capita income because the impact will be greater on the population than on growth (Nattrass, 2003). If the AIDS pandemic is perceived as being likely to result in an increase in per capita income, then the elite may regard it as in their best interests to do very little significant to halt the epidemic or alleviate its consequences. Those with the economic means to better protect themselves and their families against HIV infection (by providing access to education, condoms, healthy diets and safer life-style choices), and who have access to medical schemes to treat themselves and their loved ones if they become infected, may think their interests are better served by a 'do-very-little' scenario. They may privately calculate that they stand to benefit more as individuals from a set of policies which prioritises economic growth and minimises taxation, than they would from a social response that includes universal access to HAART and entails higher taxation and spending cuts in other areas. They would, of course, be wrong to think that they can entirely insulate themselves in this way from the AIDS pandemic. But if they believe they can, this course of action may seem preferable.
This has implications for social solidarity regarding AIDS treatment. For example, organised labour may well baulk at the tax implications of a full-scale tax-financed AIDS intervention. Many workers are already able to access HAART through their employers or medical aids and most live in urban areas (which are at the front of the queue in the treatment roll-out because the greatest capacity to deliver treatment is in the large urban hospitals). Employed workers may thus have an incentive to support a limited roll-out (with correspondingly less onerous tax implications for their pay packets) rather than a large-scale intervention aimed at reaching all those who need it.
The structural problem at the root of all this is South Africa's high unemployment rateÂ - especially among the less skilled. Section 1 places South Africa in a comparative perspective and summarises the historical roots of the unemployment crisis. Section 2 discusses various ways of addressing the unemployment problem in the light of the AIDS pandemic, and Section 3 considers the question of how to combat AIDS and unemployment/poverty through a social accord process.
Under Government's GEAR policy, high levels of expenditure on social services (i.e. Social Development, Health, Education and Housing), failed to bring about a reduction in poverty and unemployment. The Government, in particular the National Treasury, blamed this outcome on the inefficiency in the delivery of social services. The "Left", especially COSATU and its civil society partners, however, claimed that Government's commitment to conservative deficit targets under GEAR resulted in deep cuts in spending on social services.
In this paper we examine the claim from the "Left" that social spending was cut under GEAR and that this reduction led to a decrease in the quantity and quality of social services. We first analyse budgeted as well as actual spending on social services during the GEAR period (1996/7 to 2000/01). Figures were adjusted for the effects of inflation and population growth. We also examine social spending's share of total expenditure and of Gross Domestic Product (GDP). We find that while budgeted and actual social spending and social spending as share of the budget increased, actual per capital social spending and social spending as share of GDP decreased over the period. We also find that social spending as share of GDP declined by less than total expenditure's share of GDP. The evidence is therefore not conclusive enough to substantiate the claim that social spending was drastically cut under GEAR.
Next we examine the trends in social service delivery during the period to form some preliminary impression of whether the quality and quantity of service delivery did decline over the GEAR period. Again, the data does not show clear evidence of a decline in the quality and quantity of services provided over the period.
Our analyses do not provide conclusive evidence for either Government's or COSATU's claims and this debate continues to influence other debates around issues like the introduction of a basic income grant, a minimum package of education services, the realisation of basic socio-economic rights and the redesign of the equitable share formula which directs funding to the provinces.
Even though the approaches, assumptions and results may vary greatly in the macroeconomic models employed in estimating the impact of HIV/AIDS on the South African economy, the overriding message that these models convey remains the same: the cost of HIV/AIDS to South Africa will be significant in economic, social and human terms. However, the accuracy of the models and their results can be faulted for various reasons, not least the shortcomings of current demographic projections and the empirical evidence on the microeconomic impact of the epidemic, shortcomings that can be argued to translate into both under- and overestimation of the likely macroeconomic impacts of the epidemic. More work is also required to quantify the nature of the impact of the epidemic on specific sectors in the economy. In addition, more recent, alternative methodological approaches can also be explored in further investigating the macroeconomic impacts of the epidemic. Finally, models are also constrained by a lack of clarity regarding the key question of how treatment, care and support for HIV/AIDS-affected individuals and households are to be financed in South Africa, given that government at times are unclear as to what policies will be implemented to fights HIV/AIDS.
South Africa currently faces one of the highest HIV prevalence rates in the world. The estimated adult prevalence of HIV amongst 15-49 year olds in 2001 was 20.1% (UNAIDS, 2002), while the ASSA2000 model put adult prevalence amongst 20-65 year olds (in the unchanged scenario) at 24.1% (ASSA, 2003). A recent national household survey in turn has put the 2002 estimate of adult prevalence amongst those older than 25 years at 15.5% (HSRC, 2002) . Given that HIV/AIDS primarily effects the economically and sexually active population, the epidemic poses a serious threat to economic growth, development prospects and poverty alleviation. In fact, the predicted macroeconomic impacts of the HIV/AIDS epidemic make light of the macroeconomic targets of GEAR, given the projected decline in economic growth and employment.
The main aim of this paper is to review the current literature and evidence of the impact of HIV/AIDS on the South African economy. The paper is structured as follows. Section 1 provides a brief overview of the methodology of the four macroeconomic models employed in estimating the impacts of the epidemic that are reviewed in this paper. (It should be emphasized however that this is not a methodological review of macroeconomic modeling, which is outside the scope of this paper.) Given that these models project the macroeconomic impacts of the HIV/AIDS epidemic over a 10-15 year period that ranges from 2000 to 2015 and that the HIV epidemic is yet to evolve into a full-scale AIDS epidemic, the emphasis in this paper is therefore on the future challenges that HIV/AIDS poses to the South African economy, rather than the challenges during the first 10 years of democracy . Section 2 describes the main economic impact channels of the HIV/AIDS epidemic as described in these four macroeconomic models, whilst section 3 and 4 respectively focus on an overview of the assumptions (input) and projected impacts on economic growth, investment, employment, and poverty (outputs) of these four models. The assumptions and projections of these models are critically adjudged at the hand of currently available empirical evidence on the economics of HIV/AIDS in South Africa. In section 5, the implications to the macroeconomic modelling results of recent changes in the responses of government, business, communities and other role players in South Africa to the HIV/AIDS epidemic are discussed. Section 6 concludes, summarizing the main lessons to be learned from the review and the key questions that remain unanswered by current research on the economics of HIV/AIDS in South Africa.