Does the Private Sector Care About AIDS?
Evidence from Firm Surveys in East Africa
Manju K. Shah
Ginger L. Turner
Keywords: Economics, East Africa, AIDS, private sector
Objective: Our objective is to identify the determinants of HIV/AIDS prevention
activity and pre-employment health checks by private firms in Kenya, Uganda and
Design: We use data from the World Bank Enterprise Surveys for Uganda, Kenya and
Tanzania, encompassing 860 formally registered firms in the manufacturing sector.
Methods: Econometric analysis of firm survey data is used to identify the determinants
of HIV/AIDS prevention including condom distribution and voluntary counseling and
testing (VCT). Multivariate regression analysis is the main tool used to determine
Results: About a third of enterprises invest in HIV/AIDS prevention. Prevention activity
increases with size, most likely because larger firms, and firms with higher skilled
workers have higher replacement costs. But even in the category of larger firms, less
than 50 percent provide voluntary counseling and testing (VCT). We find that the
propensity of firms to carry out pre-employment health checks of workers also varies by
size of firm and skill level of the workforce. Finally, data from worker surveys show a
high degree of willingness on the part of workers to be tested for HIV in the three East
HIV/AIDS has had an enormous impact on the economies of sub-Saharan Africa. Using
firm survey data from East Africa, we find that despite the high sero-prevalence rate of
HIV in the survey area, only a small proportion of firms—about 35 percent--engage in
prevention activities. And while prevention activity increases with firm size, less than 50
percent of large firms provide voluntary counseling and testing (VCT).
Using data from the World Bank Enterprise Surveys, which includes a sample of 860
firms in Uganda, Kenya and Tanzania, we examine two discrete actions--providing
prevention services, and conducting pre-employment health checks. We find that about
35 percent of firms engage in HIV/AIDS prevention activity, while the percentage of
firms conducting pre-employment health checks in our sample ranges from about 20
percent in Uganda to over 50 percent in Tanzania. Finally, our data also indicate that a
large proportion of workers are willing to pay to be tested for HIV/AIDS.
We find that larger firms and firms with a higher skilled and/or better trained workforce
tend to do more about HIV/AIDS through prevention activities; these firms are also more
likely to conduct pre-employment health checks to screen applicants. Firms where a
majority of workers are unionized are also more likely to carry out HIV/AIDS prevention
activities and pre-employment health checks. Finally, managers who are concerned
about absenteeism are also more likely to carry out HIV/AIDS prevention activities. We
also find that workers have a high willingness to be tested for HIV when asked; this is not
consistent with available private sector data on VCT uptake and therefore suggests that
significant barriers remain for workplace provision of VCT.
II: Economic Analysis of HIV/AIDS in East Africa—Review of the Literature
Kenya, Tanzania and Uganda have all been struggling with the problem of HIV/AIDS for
more than a quarter-century. Table 1 below presents the HIV prevalence rates for these
countries in 2003 (the period of data collection used in this paper). We see that Tanzania
had the highest prevalence rate and absolute number of HIV-positive persons, followed
by Kenya, and Uganda. All three countries have mounted public campaigns to fight
HIV/AIDS; these campaigns have increasingly been supplemented by private sector
While there is a large literature on the problem of HIV/AIDS in Africa, there is relatively
little rigorous analysis of private sector activity. A global survey in 2003 revealed that the
private sector is not doing enough about AIDS (Bloom, 2004; Taylor et al, 2004). The
World Economic Forum’s Global Health Initiative website summarizes the results of the
study as follows:1
Of the nearly 8,000 businesses surveyed in 103 countries:
-47% felt that HIV will have some impact on their business; this number is much
lower in countries that to date have not been hard-hit by HIV. There are
important regional variances – in Africa, 89% thought HIV would have some
impact, but in the Middle East and North Africa that figure dropped to 33%.
Worldwide, 21% of surveyed firms feel that HIV will have a severe impact on
-Business leaders estimate lower HIV infection rates among their workforce than
UNAIDS (official national adult prevalence figures), although 36% of business
leaders did not or could not estimate how many of their employees had HIV. The
small proportion of firms that have conducted quantitative studies estimates lower
rates than other firms.
In summarizing the findings of their paper, David Bloom and coauthors argue that firms
have taken little action regarding HIV in Africa (Bloom et al, 2004). They write that the
largest discrepancy between firm perceptions and actual data is to be found in Africa,
where 45 percent of firms report less than 1 percent prevalence, despite data from
UNAIDS that shows only 10 percent of respondent firms in Africa are located in low-
prevalence countries. They argue that as of 2003-04, the response to AIDS by the private
sector has been piecemeal with only a few firms having HIV/AIDS policies; the response
is limited even when firms are quite concerned about HIV. In these cases, businesses
seem to rely more on the public sector to deal with the problem.
In Rosen’s analysis of Nigeria, she also argues that managers are doing little about AIDS
(Rosen, 2001). Survey data used in this paper in 2001 showed that AIDS was not yet a
big problem in the Nigerian workplace and most managers have had little experience
dealing with it. Rosen also makes the interesting argument that given the high cost of the
business environment in Nigeria (power, water), it is unlikely that AIDS would enter the
“top ten” list of concerns for a while. Using a similar firm-level dataset, Biggs and Shah
looked at the impact of AIDS in the mid-1990s through worker attrition due to sickness
and death on firm performance and concluded that there is no significant measurable
impact (Biggs and Shah, 1997).
A recent study of agricultural workers in Kenya provided empirical estimates of the
impact of HIV/AIDS on labor productivity, by comparing healthy workers to workers
who later left the company due to HIV, through retrospective measures of output for
several years before their exit (Fox et al, 2004). Workers terminated because of AIDS-
related causes earned 16-18 percent less in the two years before termination, as well as
choosing less strenuous tasks and using more sick leave days. Rosen et al. 2004
examined the cost of AIDS to six large employers in South Africa, estimating the cost at
0.4 to 5.9 percent of the total wage and salary bill, with each infected employee costing
the employer an average of 0.5 to 3.6 times his or her annual salary. Rosen observes
elsewhere that many large employers are actively taking steps to shift the economic
burden of AIDS onto employees and governments, through such practices as outsourcing
unskilled jobs and capping benefits premiums (Rosen and Simon, 2003).
In a survey of 80 small and medium enterprises in South Africa, Connelly and Rosen
(2005) found that managers on average ranked HIV/AIDS as 9 out of 10 on the list of
priorities. Managers attributed a low percentage of productivity losses to HIV and found
worker replacement inexpensive. In addition, the study found lack of information to be a
major constraint; managers were unaware of free services available nearby. Aurum
Health recently demonstrated the profitability of AIDS workplace programs in 9 large
firms, including Anglo-American Mining. It observed a 60 percent decrease in
absenteeism, which compensated for 70 percent of the costs of the AIDS workplace
programs, the rest of which were covered by other cost savings (Aurum Health, 2005).
The South African Business Coalition Against HIV/AIDS (SABCOHA) has recently
targeted SMEs with its SME toolkit, for sale for approximately $215, which has attracted
very low uptake (Mears, 2005).
A number of studies have quantified the projected macroeconomic impact of HIV/AIDS
on the labor force (Over, 1997; Dorrington, 2002; Coulibaly/ILO, 2005). It has been
more challenging to demonstrate the microeconomic cost to firms of HIV-related
absenteeism and lower productivity, mostly due to the difficulty of gathering firm data
and confidential worker health information (often not known by managers or even
workers themselves) within the same survey instrument. Although Biggs and Shah found
no significant impact of HIV on productivity across a large survey of manufacturing
firms, possibly due to the ease of replacing workers in the earlier years of the epidemic,
more recent case studies (Fox et al, 2004; Maffessanti, 2006a and 2006b) have been able
to identify a link between HIV infection, higher absenteeism, and lower productivity.
III. Firm Behavior in East Africa
The analysis contained in this paper is based on a sample of 860 firms across Uganda,
Kenya and Tanzania and 4,955 workers. The data for this study come from the World
Bank’s Enterprise Surveys, collected in 2002-03, in collaboration with local
organizations in Africa.2 These firms are located in “traditional” sectors such as agro-
processing, wood/furniture, textiles/garments/leather, paper and publishing, construction,
chemicals and plastics, and metalworking. Each firm was interviewed in person by a
team of enumerators--in most cases, the manager, accountant, and up to 10 workers were
interviewed separately to collect the information used in this analysis.
2 More information about this dataset is available at www.enterprisesurveys.org. The collaborating
institutions for the design and enumeration of the East African surveys were the Kenya Institute for Public
Policy Research (KIPPRA), the Economic and Social Research Foundation-Tanzania (ESRF) and the
Uganda Manufacturers Association Consulting Services (UMACIS).
Table A.3: The Sample of Firms in Tanzania
Firm Size (%) Firm Activity (%)
Small (<100 employees) 74.28 Agribusiness
Market Orientation (%)
Exporter (>=10 % sales) 18.84 Paper, printing, publishing
Non-exporter 81.16 Plastics
Firm Ownership (%)
SampleDar es Salaam
Publicly listed 2.55 Arusha
Private held, limited 62.18 Mwanza/Mara
Publicly held, limited 2.18 Kilimanjaro
Cooperative 5.45 Tanga
Sole proprietorship 17.45 Kagera
Partnership 7.27 Morogoro
Government-owned 1.09 Iringa/Mbeya
Other 1.82 Zanzibar
Source: World Bank(2003), Investment Climate Assessment for Tanzania
25.72 Chemicals and paints
SampleFurniture and wood
Textiles, garments, leather 11.23
Firm Location (%)
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