IFC Against AIDS Protecting People and Profitability

Session Outline Why IFC takes the AIDS crisis seriously The business case for action Risk triggers for the private sector Resources existing at IFC

Why IFC Takes AIDS Seriously A priority for the development community 95% of people infected live in developing countries Most companies not aware of risks Companies don’t know where to start An integral part of IFC’s commitment to sustainable development

The Business Case Reputation risk Financial impact Threat to company’s viability

The Reputation Risk

AIDS: Impact On Bottom Line Medical and other benefits costs Absenteeism and lower productivity Labor turnover, recruitment and training costs Experienced personnel Enabling environment Shrinking markets

The Business Case Benefits vs. Costs Boston University AIDS impact assessment on six corporations in South Africa and Botswana. Six industries: mining, metals processing, utilities, agribusiness, retail, and media. Findings: –The annual "AIDS tax" on business was as much as 5.9% of the corporations' labor costs. –Workplace AIDS programs would reduce this “AIDS tax” by as much as 40.4%. –All six companies would have earned positive returns on their investments if they had provided antiretroviral drugs at no cost to HIV-positive employees. Source: Harvard Business Review, February 2003

The Business Case Benefits vs. Costs Source: Roberts et al. 1997

The Business Case Benefits vs. Costs A University of California-San Francisco study on large Ugandan companies (500+ employees) found that even programs offering the most expensive HIV treatment — anti-retroviral care — can be cost-effective especially in light of 85% price reductions offered by drug manufacturers for sub-Saharan Africa. Source: UCSF electronic newsletter Daybreak, 7/14/2000 A study of 16 large firms (average 1,200-1,500 employees in each firm) in Kenya estimated that the AIDS impact could be 3-8% of total labor costs by 2005 and 4% of profits. Source: AmfAR - Treatment Insider Newsletter, January 2003

The Business Case Benefits vs. Costs A major industrial company based in KwaZulu- Natal, South Africa recorded a 31% increase in the number of ill-health retirements between 1995 and 1997; of these retirements, 17% of them were due to AIDS. Source: Galloway et al. 1998

The Business Case Benefits vs. Costs Most firms pay funeral costs such as coffins, transport of the body and a number of mourners, and 6-12 months payment of death gratuity. One sugar company in Uganda estimates this cost to total US$500 per employee. Source:Nabalonzi et al Chilanga, Zambia’s largest cement factory saw a 15-fold increase in funeral-related absenteeism between 1992 and As a result, the company has restricted employee absenteeism for funerals to only those for a spouse, parent or child. Source: Bloom et al. 2001

Financial Institutions Benefits vs. Costs Barclays Bank – Zambia –The death rate among employees increased from 0.4% in 1987 to 2.2% in –The company lost an average of 36 of its 1,600 employees annually to HIV/AIDS. –More than 70% of the deaths occurred in those under 40. –Ex-gratia payments to families increased by nearly 350% between 1991 and Source: Bloom et al. 2001

Financial Institutions Benefits vs. Costs In South Africa, the cost of employee benefits, sick leave, and lost productivity can increase because of AIDS by as much as 2.9% for a financial services company. These costs represent the discounted value of all future expected extra costs, as a percentage of the discounted value of all future expected salaries. Source: Actuarial Solutions - AIDS impact assessment To Employers of Financial services companies in South Africa

Financial Institutions Corporate Image Enhancement In 2003, Standard Chartered Bank received the Award for Business Excellence in the Workplace of the Global Business Coalition on AIDS for its leadership demonstrated over a number of years in addressing HIV in the workplace and the surrounding communities. Source: Global Business Coalition on HIV/AIDS

Global Manufacturing and Services Benefits vs. Costs A South African sugar mill found that HIV-positive employees took, on average, 55 additional sick days during the last two years of their lives, incurring economic costs of nearly 8,500 Rand per worker. Costs to the industry were projected to increase 10-fold in the next 6 years. Source: Morris et al A detailed analysis of the Lonrho Companies (a group that has holdings in mining, sugar, cotton, automotive and other industries) found that the cost of HIV/AIDS was about 1.1% of total costs for the company, and consisted of 3.4% of gross profits. Source: Ntirenda, C. and Zimba D. 1998

Global Manufacturing and Services Benefits vs. Costs In Madras, India, a study of large industries conducted by UNAIDS in 1998 found that absenteeism was expected to double by 2000, largely as a result of Sexually Transmitted Diseases (STDs) and HIV-related illnesses. Source: UNAIDS 1998 Survey among the Confederation of Tanzania Industries' members: –Medical care costs have been increasing over the years due to HIV/AIDS-related treatment. –More than 50% of industrialists spend up to 20% of their annual medical bill on HIV/AIDS-related care. –About 40% of company death benefits went to funeral services for employees who died of HIV/AIDS-related illnesses. Source: All Africa 2003

Global Manufacturing and Services Benefits vs. Costs Chilanga, Zambia’s largest cement factory saw a 15-fold increase in funeral-related absenteeism between 1992 and As a result, the company has restricted employee absenteeism for funerals to only those for a spouse, parent or child. Source: Bloom et al DaimlerChrysler – South Africa estimated that averting one new HIV infection among its employees saves the equivalent of three to four annual salaries. Source: AmfAR - Treatment Insider Newsletter, January 2003

Mining Benefits vs. Costs In 2000, Debswana tallied the cost of AIDS care to be 10.7% of its payroll. A South African agency estimated in 1997 the average annual AIDS-related cost per patient to be 45,000 Rand ($9,500 at the time), but that shot up to 70,000 Rand ($15,500) in unmanaged patients. Source: UNAIDS, 2002 Gold Fields – South Africa’s second-largest gold producer estimated that HIV/AIDS was costing the company US$3.22 per ounce of gold produced. The company estimated that the cost of inaction would have been more than US$10 per ounce by Source: AmfAR - Treatment Insider Newsletter, January 2003

Transportation Benefits vs. Costs National Railways of Zimbabwe (NRZ): –In 1990, the company reported operational problems due to an absenteeism rate greater than 15%. –A later impact study estimated the company’s AIDS costs at Z$39million, which is equivalent to 20% of the company’s profits. –In 1997, absenteeism costs increased further to Z$80 million. –Training costs to replace skilled workers (direct training and lower productivity) were projected to increase fivefold due to AIDS between 1991 and Source: National Railways of Zimbabwe, 1997

Oil and Gas Benefits vs. Costs A study commissioned by the South African subsidiary of British Petroleum (BP) found that workers with AIDS had taken on average 27.5 more sick days than expected. Each death from AIDS equaled four days of a manager's time and resulted in 20 employees losing five days of productive time. Source: AmfAR - Treatment Insider Newsletter, January 2003 A petroleum refinery in Zambia found that 84% of worker deaths from were AIDS-related. Medical expenses were approximately US$225 per patient. Source: Bloom et al. 2001

Agribusiness Benefits vs. Costs Tea Estate – Kenya. Study findings: –HIV-positive workers had plucked significantly less tea than controls. –In their last two years of life, those who ultimately died of AIDS had produced roughly one third less tea than other pluckers. –Their earnings had declined by more than 18% during their last year of life. –The quantity of tea plucked had declined and the use of leave time increased as they became closer to death. Source: Fox et al. 2003

SMEs Viability A study of 209 small businesses in South Africa identified HIV/AIDS as one of the three main factors that cause nearly 80% of South African start-up SMEs to fail every year (the other two factors are crime and inadequate management expertise) Source: Xinhua News Agency, 11 July 2001

The Risk Is Highest When… Migrant labor Long-distance transportation Well-paid workers Targets of activists Reliance on key jobs/individuals

IFC Against AIDS  Awareness  Guidance  Training  Financing Goal: Accelerate the involvement of private sector in fight against AIDS

Guidance Risks and opportunity assessment AIDS policy Education and prevention Occupational health and safety Care and treatment Community outreach Evaluation and incentives Leveraging partners

Intranet website

External website

“It is inevitable that a firm doing business in the developing world will pay for AIDS. It is just a question of when and how much.” Lee Smith Former President, Levi Strauss International

IFC Against AIDS Sabine Durier - Program Leader Tel: (1-202) , Gillette Conner - Program Officer Tel: (1-202) , Vlassis Tigkarakis - Program Analyst Tel: (1-202) ,