Anglo-American PLC in South Africa: what do you do when costs reach epidemic proportionsSlides Compiled By:

Arpit Kapoor

Kishu Bhatia

Arpit Agarwal

About The Case…

Case Facts…

AIDS In South Africa:-

Sub-Saharan Africa is home to just over 10percent of the world’s population and to 60percent of all people infected with HIV

Every day 1,000 South Africans contract HIV and another 800 die

AIDS has also had a devastating effect on the country’s economy

•Between 1992 and 2002, the South African economy lost $7billion annually—around 2percent of GDP—as a result of AIDS-related worker deaths

Case Facts…

Anglo American Operations In South Africa :-

Anglo American PLC is a mining conglomerate operating in 61 countries

Founded in 1917 as the Anglo American Corporation of South Africa, it was South Africa’s first home-based public limited company

Anglo American employs 80,000 people in its main operations and another 44,000 at regional subsidiaries

Anglo American controls over 25percent of all shares traded on the South African stock market

Case Facts…

Anglo American And Art :-

Anglo American was one of the first corporations to develop a comprehensive, proactive strategy to combat the destruction of the disease on its workforce

The incentive for Anglo American’s ART program largely came from the failure of its AIDS-prevention efforts to make much headway in stemming the spread of the disease

Anglo American had to bear the costs entailed by high levels of absenteeism, the constant retraining of replacement workers, and burgeoning pay outs in health, hospitalization, and death benefits

Anglo American also faces the problem of spiralling costs for the program itself

The biggest challenges facing Anglo American is encouraging participation among a migrant and largely ignorant workforce labouring under harsh conditions in an unstable environment

Constituencies and Critics

National Union of Mineworkers has been citing Anglo American limitations on health-insurance benefits and lack of cooperation with national agencies

The Union has also accused Anglo American of helping to foster working conditions that exacerbate the problem

Anglo American outright opposition from political leaders

QUESTION 1

What are the pros and cons of Anglo American’s

adoption of an aggressive strategy in combating

HIV/AIDS among its South African workforce? What

recommendations would you give the company

concerning its HIV/AIDS policy?

ANSWER 1 Pros:-

• It became a trend setter for other major companies operating in South Africa, thus

gaining a goodwill among other companies which can be helpful in partnering with other

major companies not only in South Africa but also in other part of the world .

• It got good response form WHO , Global Business Council for HIV / AIDS and

other NGOs, thus making it as a socially responsible organization in Global business .

• The early adoption strategy helped it to prevent further loss in operating expenses by pro

viding awareness and ART to its employee in earlier stage .

• It also prevented the possible higher loss to the company i.e. if in case the worker were le

ft untreated then losses would have been higher than providing ART .

• Excellent corporate social responsibility initiatives were displayed by AA by not only

taking preventive measures but also conducting care and wellness programs extending up

to the employees and their families.

Continued… CONS:-

The cost of the program is spiralling because the cost of distribution of the necessary drugs remains high and the estimated cost of $4000 per year per employee is also high compared to the average monthly wages of $830.

The South African government was not very appreciative of Anglo American PLC’s efforts to combat HIV/AIDS in South Africa. As a result, Anglo American PLC stands the chance of losing the good will of the South African government.

In spite of spending so much money on the program, Anglo American PLC suffers from about 15% people who are not adhering to the program.

The treatment regimen is such that it needs works to adhere to strict schedules .However due to harsh working conditions workers find it difficult to adhere to the schedules.

Recommendations…

RECOMMENDATIONS:-

The company should stop persisting with its existing policy and avoid further wastage of money and resources.

The pressure would reduce a little bit from the government and other MNE’s which are constantly criticizing the company.

The company can pursue its humanitarian objectives in the future considering the fact that the South African government is seemingly undergoing a change of heart.

This decision should be effectively conveyed to the company shareholders and the global clients of the company to manage the international image of the company.

QUESTION 2

Because such a large percentage of its workforce

consists of migrant workers who are more likely to

acquire and spread HIV/AIDS, should Anglo

American adopt the policy of not hiring migrant

workers? Should the South African government close

the doors to migrant workers?

ANSWER 2

No, the Anglo American shouldn't adopt such policy as migrant workers constitute large percentage of workforce

Instead more active participation should be encouraged from other companies as well as from government side in spreading awareness and educating the workforce regarding precautionary measures against the disease and regular survey and counseling should be done to stop the climbing figure of the disease.

QUESTION 3

What role do pharmaceutical companies play in

responding to the HIV/AIDS epidemic in South

Africa? What policies or courses of action would you

recommend to a company that produces HIV/AIDS

drugs?

ANSWER 3 The pharmaceutical companies are the source of the drugs with

which to combat this plague

On the one hand utter lack of resources, one could easily conclude that there is relatively little that can be done to alleviate the suffering and stop the spread of the disease

Still in all, the pharmaceutical companies can seek to partner with aid agencies, international organizations, governments, and the private sector in their search for acceptable and effective solutions.

Continued…. Pharmaceutical firms will most surely be concerned about the issue of

patent protection and generic drugs, as well as the prospect of tiered pricing and significantly lower profit margins.

Governments, other members of the private sector, and other stakeholders will all need to be mindful of the tremendous costs and risks that are borne by pharmaceutical firms.

Further, given the extent and the seriousness of the problem, a lack of commitment on the part of any stakeholder will be a serious setback in the march toward a community solution. 

QUESTION 4

Elsewhere in the chapter, we described the more

aggressive policies of the Brazilian and Thai

governments in the battle against HIV/AIDS. Should

the South African government adopt a similarly

aggressive approach? Why or why not?

ANSWER 4 No, South Africa government should not adopt a similar aggressive approach

because:

To permit local companies to make unlicensed generics which is unethical

The companies take advantages of a TRIPs clause that allows them to avoid paying royalties.

Though, Brazil and Thailand faced similar problem of epidemic like spread of HIV/AIDS, there were various differences in their political, legal, cultural and economic conditions. Let us first understand their steps and then reach to a logical connect and accordingly decide if South Africa can adopt some of the steps that were undertaken another countries like Brazil and Thailand.

Brazil and Thailand have permitted local companies to make unlicensed generics taking advantage of TRIPS clause which allows them to avoid paying royalty on the drugs.

This has lead to a spiralling effect wherein price cuts have occurred in the rates of  patented drugs as well leading to overall reduction of prices in the market.

In South Africa GlaxoSmithKline is already offering HIV/AIDS drugs at one-tenth of a market price.

Thus, South Africa is already getting access to top quality branded drugs at very less prices.

The Endeavour taken up by AA together with GlaxoSmithKline can promote other  pharmaceutical MNE’s to make FDI investments in the country and thus strengthen the fight against HIV/AIDS.

Also, in case the situation worsens in the country it might need increased international aid and in case it follows an aggressive policy, it won’t be able to avail of it from other countries.

Thus, South Africa should not resort to the aggressive policies of Brazil and Thailand.

Thank You…