97% of population growth to be in developing world

24 June 2015 Consultancy.uk

Developing regions will see 97% of the world’s population growth of 1.2 billion people between 2013 and 2030, research by Roland Berger finds. In the same period the median age will increase to 33.2 years. Net migration too is expected to increase, with 44 million people on the move between 2013 and 2030, while cities will become ever more important as urban areas claim 60% of the world’s population.

Roland Berger’s ‘Trend Compendium 2030: Demographic dynamics’, maps out global changes in human demographics between 2013 and 2030. The report maps the trajectory of the planet in ‘normal’ circumstance, thus, without allowing for natural disasters, increased mortality from antibiotic resistance. To generate the results, the consulting firm screened all relevant trend, scenario and future studies worldwide, after which they verified, analysed and consolidated the results, using them to define the megatrends.

World population changes

Growing population
The world’s population is projected to grow to 8.4 billion by 2030, up 18% on the 7.2 billion today. Roland Berger finds however that the rate of growth for the world population is expected to decrease; with an annualised rate of 1.3% or 79 million people between 1993 and 2013, dropping to an annualised rate of 0.96% averaged between 2013 and 2030.

The highest population growth rates will continue to be in developing regions, accounting for 97% of the increase to 2030. The worlds developing regions will see 1.2 billion people added, a 20.7% increase; while the population of developed countries will increase a mere 3.3% adding 41 million to the current 1.3 billion people. The regions to see the largest increase in population are India (adding 224.3 million) Nigeria (99.5 million) and China (67.7 million). In contrast, the UK will grow by 5.5 million while Germany will see a decrease of -3.2 million people.

Youngest and oldest population by median age

The global median age is expected to increase from 29.2 years in 2013 to 33.2 years in 2030. There is a difference of more than ten years between the median age in developing and developed regions. The median age in developed regions will increase from 40.5 year to 43.7 years and in developing regions from 27.2 years to 31.2 years. The biggest reason for the changes is the projected increase in life expectancy combined with lower fertility rates.

Global working age
The increase in the median age will affect the number of working age people. The projection shows that in developed countries the working age population will drop from 48% of the total population in 2013 to 44% in 2030. The biggest challenge in developed countries will be to cope with the increased share of population aged 60+, up from 23% in 2013 to 29% in 2030. While developed regions will need to consider how best to enjoy the golden years, developing regions will see a large absolute increase of young people looking to be educated and make their way in the world.

Net immigration between 2013 and 2030

Migration and urbanisation
The report finds that migration will increase over the coming years, with especially Europe and the US expected to see an influx of migrants. Currently, 3% of the world's population live as migrants in foreign countries, of which about 45% reside in either the EU or the US. Between 2013 and 2030 there will be worldwide net migration of 44 million people. The US will see the biggest increase (+22), followed by Europe (+18 million) and Oceania (+3 million), while Asia will see a decrease of -24 million, Latin America and the Caribbean -10 million and Africa -9 million.

People living in urban and rural areas

It is not merely that people will migrate to other regions, within regions migration from rural areas to cities is also expected to increase rapidly over the coming 20 years. By 2030, 60% of the world’s population will be living in urban areas, compared to today’s 53%. In number terms, this means that 1.2 billion people will be leaving the fields to take part in city life. Eight out of ten (82%) people in developed countries and almost 56% of the population in developing countries will live in urban areas.

The consultancy notes that while the changes in world demographics will provide huge opportunities for business and people, large challenges too are expected to arise as billions of people come into existence and join urban ways of life.

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Brazilian private equity market still full of lucrative opportunities

26 October 2017 Consultancy.uk

Brazil remains a strong candidate for private equity firm investment, according to a new study from BCG. The country, which is projected to experience steady growth in the coming years, has a relatively mature market with a low level of penetration.

The private equity industry has seen stellar growth over the past decades, with wealth under its management having grown to $3 trillion globally, while the number of firms active in the sector has exploded to more than 4,700.

A new report from The Boston Consulting Group (BCG) considers opportunities for the industry in Brazil. The report is based on the firm’s recent analysis into the Brazilian economy.

Economic boom

Market dynamics

Brazil enjoyed near-explosive growth between 2001 and 2011. The country's economy rose from the world’s 11th to 6th largest, on the back of consumer debt and workforce expansion. Since 2013, however, the country fell into a period of protracted decline, punctuated by a series of political scandals and crises. As it stands, the country has all but run out of the fuel that saw its initial growth spurt, and continues to be hammered by lower global commodity prices. As a result, growth is set to remain relatively modest at 1.8% till 2021.

In terms of growth by industry, a mixed bag was noted, with some industries such as mining and quarrying seeing rapid expansion between 2009 and 2012, at 43.7% CAGR, before crashing to -34.3% CAGR between 2013-2016. Construction has seen a significant drop too, as has transportation during the same period. Financial services and utilities are the only industries to have seen gains during the period. Relatively high levels of inflation across both periods put a further dampener on real growth rates.Spenging in consumer segmentsThe study also considered the different segments of the market that have enjoyed the highest level of growth during the crisis years, from 2013 until 2015, relative to the years before the crisis from 2010 to 2013. Interestingly, while spending in various segments was relatively consistent, gas stations, super markets and pharmacies all enjoyed relatively high and resilient levels of growth. Other areas of the economy saw slowdowns.

Consumers were particularly less keen on durable goods such as consumer electronics, apparel, department stores and furniture and home décor. Within the latter category in particular, spending growth fell from more than 12% CAGR to around 3%. While the economy saw contraction, the report notes that, for a large part, growth in consumer goods spending remained relatively robust during the crisis years.Global PE interest in Brazil

Private equity market potential

According to BCG, the Brazilian PE market has growth potential. The firm notes that as a % of GDP, PE activity represents around 0.31%, substantially below activity in the US of 1.41% and the UK of 1.91%. Competition remains relatively fierce, however, as a range of global players enter the market, attracted by relative maturity and lower levels of penetration.

Median deal sizes in the country also tend to be relatively lower than that of developed markets, with key players investing only comparatively low amounts per deal in the country; in total, around 63% being in the $50 million to $200 million range, compared to 47% for the US in the same period. The large number of deals in the low range, therefore, reflects tighter competition for deals.Investment activity and exists.The research also looked at PE and VC activity in Brazil over the six years, in terms of investments, dry power and other (reinvestments in companies, operating expenses and returns to shareholders).

Total investment, saw an increase even during the down period, hitting $53.9 billion in 2014, before falling slightly to $45.9 billion in 2015 and $41 billion last year. The largest segment by far was investment, followed by dry power.

Value creation has increasingly been derived from revenue growth and margin improvement, at 50% and 33% respectively in 2014, as compared to 2011 when they stood at 45% and 25% of growth respectively. Relatively low gains from leverage were reflected in the relatively high interest rate in the country.

Finally, exit activity has remained relatively steady, even while investment flows have declined considerably – falling by 39% between 2015 and 2016. Exits were predominantly from strategic buyers (45%), followed by IPO (19%).

Commenting on the result, the firm’s Heitor Carrera, a BCG partner and co-author of the report, said, “That combination of factors puts Brazil in the sweet spot for companies willing to invest in emerging economies. Over the next decade, the country will offer a rare opportunity to both global firms that want to add emerging markets to their portfolios and local firms in Brazil that want to step up their investments there.”