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QUEST MEANS BUSINESS

25 EU Countries Sign Fiscal Compact; EU Meeting Not Just Crisis Management; Changes from Maastricht Treaty; Mixed Markets in Europe; Bond Yield Boost; Yelp Shares Rise; Investigation of Costa Allegra Ship Fire; Costa Allegra Passengers on Dry Land; Costa's PR Nightmare

Aired March 2, 2012 - 14:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


RICHARD QUEST, HOST: It's time for discipline. All but two EU leaders sign the fiscal compact.

Yelp if you want to go faster. Shares leap 60 percent.

And tonight, introducing a different kind of mobile home, the Barcelona Mobile World Congress.

I'm Richard Quest. It might be Friday, but I still mean business.

Good evening. Tonight, a milestone along the way to reconstruction and redefining the European Union as leaders from 25 countries sign this document. It is the new fiscal compact. It provides both a turning point in the debt crisis and a step towards closer economic union for those who agree to it.

If you look into -- deep into the 11 pages, the numerous articles, the fiscal compact, the consistency, on it goes. The rules will include a requirement to keep deficits below half a percent of GDP, structural deficits, that is.

Those countries that don't will be subject to what they call automatic correction mechanisms, and these still have to be defined. The pact will be voted on by national parliaments, where required, and there'll be a referendum in Ireland after the attorney general there determined that that was a constitutional necessity.

You're aware the UK and the Czech Republic opted out, so because of that, it won't become EU law. It does go into the statute books of those nations which sign up, in some cases, into their constitutions.

(RINGS BELL)

QUEST: Charles Hodson is in Brussels tonight. We knew it was coming. It's -- it answers a lot of questions. It raises many more. But this treaty will be regarded as a turning point.

CHARLES HODSON, CNN INTERNATIONAL CORRESPONDENT: I think you're absolutely right. The important thing about it is, of course, that requirement that structural deficits be held at less than half of one percent of GDP. That is a great deal tighter than the existing Maastricht treaty, which binds members of the eurozone.

And the most important thing here, Richard, and what sticks in the craw of the Czechs and, of course, the British, is the fact that there will be a transfer of sovereignty.

Because the governments that sign up to this, the members states that sign up to this, will no longer be entirely free to set their own fiscal policies. Instead, they will have to pass those through Brussels and make sure that they're OK, get those rubber-stamped.

Now, on the other side of this, it's interesting because initially this was conceived as a treaty for the eurozone for the 17 eurozone members. But actually, despite the fact that Britain and the Czech Republic did not sign, think about it. There are eight members of the European Union who are not eurozone members who also signed.

And I think what they're seeing this as is an important piece -- if you like, and important gesture, which says we sign up to stability, we sign up to coordination, we sign up to credibility.

Nevertheless, it hasn't really been what the major thrust of this summit has been about. I think that what the summiteers have felt is, we finally got some of the crisis management of Greece out of the way, although that obviously was discussed. Instead, we've been able to look at the problem of the macro economy, the broader economic problems of Europe.

And certainly, the Danish prime minister, who currently holds the presidency of the European Union, was very relieved at the change of focus. Let's listen to her.

(BEGIN VIDEO CLIP)

HELLE THORNING-SCHMIDT, PRIME MINISTER OF DENMARK: I'm very confident that if we want to have solutions for the European economy, we need to meet, we need to take positions, and this is what we have done over the last few months.

We have had a lot of crisis meetings in the EU, and for the first time, this is not a crisis meeting. This is a meeting where we not only discuss what has happened in the past, but we're also trying to look to the future and start to discuss how do we create new growth in Europe? How do we create more jobs in Europe?

We have been bogged down in the crisis for a very long time. Now, I wouldn't say we're past the crisis, but we're also -- we also have the energy to focus on other things.

HODSON: Well, clearly, crisis management has been taken up with Greece, and Greece is not out of the woods yet. There are still certain conditions that have to be met. Are you confident that this is all going to go through, that it will happen, and that Greece will cease to be a problem for the eurozone?

THORNING-SCHMIDT: I'm confident that the decision that the Greeks have to take will be taken. I'm very confident that the firewall that we build on will be sufficient for now. And these are important decisions. People tend to take these decisions lightly. They are very important decisions that shows the solidarity between the member states of the eurozone. They have been solidarity with the Greek people.

And I hope, now, that with this new firewall, the Greeks will have the opportunity to pass the law, so they have to pass, and get through to the other side.

(END VIDEO CLIP)

HODSON: In terms of the debt crisis, Richard, I think of it as being three time horizons. Longer term, you've got the fiscal compact, which deals with the long-term credibility, deals with what might happen, 7 to 10 years out.

Meanwhile, short term, Greece, everyone is hoping, will be off the table relatively soon, although there has to be a bit of skepticism.

But in terms of the medium term, the G20, the International Monetary Fund, and the European Union ultimately hope to put together what would be an amazing $2 trillion firewall, a $2 trillion rescue fund.

Now, in order to do that, the European stability fund, stability mechanism, which comes in, the ESM, which comes in on the 1st of July as being the kind of prominent rescue fund for the European Union, needs to be boosted from its current level of 500 billion euros, just under $700 billion, to maybe something more like a trillion dollars.

The problem there is that the Germans are very reluctant to see that happen at the moment. But it looks as if they may be crumbling. If a Greek deal gets done, then they may very well put that together.

Certainly, I've been asking the European Commission president, Jose Manuel Barroso, if he is confident that this deal, putting this firewall together, can be done.

(BEGIN VIDEO CLIP)

JOSE MANUEL BARROSO, PRESIDENT, EUROPEAN COMMISSION: I'll not comment on precise figures, but I can tell you that I'm confident that during this month of March, there will be a positive reassessment of the need for more funds for the firewall, yes. I believe that it will happen.

At the same time, the European Union member states have been the biggest contributors to the IMF. I hope the IMF also recognizes this.

(END VIDEO CLIP)

HODSON: Well, let's hope that these three time horizons, if you like, can be dealt with, although there's a tremendous amount of work still to be done.

You're back with the big overarching problem which besets Europe, and that is the fact that households are being squeezed by higher unemployment, by higher taxes, by lower state benefits, higher inflation. And if the economy can be sorted out, then a lot of this will follow. But that, I think, is the greatest grounds for skepticism of all, Richard.

QUEST: All right. Charles Hodson, who is in Brussels for us tonight. Many thanks, Charles.

Europe cannot afford to make the same mistakes that happened with Maastricht, certainly when it comes to the implementation of this treaty. After all, not only did the European government put in things like a 3 percent deficit limit and a GDP-to-debt limit of 60 percent, many countries simply ignored it, and those that didn't ignore it got the rules changed, like France and Germany.

So, I spoke to Christian Schulz, the senior economist at Berenberg Bank, and I asked him, will this compact do the business?

(BEGIN VIDEOTAPE)

CHRISTIAN SCHULZ, SENIOR ECONOMIST, BERENBERG BANK: Well, if it's good, then it builds confidence that the euro area, in the longer term, will be a safe place to invest. This is what the program is supposed to do.

But to get there, we still have lots of work to do. Every country needs to comply with the rules, needs to cut the deficit, needs to reform itself and grow. So, there's a long way to go, but in the longer term, this should improve confidence in the euro area.

QUEST: Which part of this treaty is the important bit? Is it, for instance, the deficit limit of half a percentage point? Is it the coordination of economic policies? Is it the ability to take enforcement action? Which bit is going to really do the trick?

SCHULZ: I think the one thing this treaty improves is the enforcement of the rules that we've had before. The rules are stricter than before, but they're not really new. We've had these rules before. But what is new is, it's going to be implemented in national law. Either in the law or, even better, in the constitution. So it binds governments into these targets in the longer term.

QUEST: But the enforcement mechanism within this -- the czar, the fines, whatever -- is it in here?

SCHULZ: Well, this is where the veto of two countries to make this an EU treaty really hurts. If it had been an EU treaty, you could've had the European Court of Justice or other bodies of the EU really enforce it.

Now, we have to have -- we have a role for the European Court of Justice, but it's not as clean-cut as it would have been.

QUEST: So, what's the enforcement mechanism in this?

SCHULZ: Well, the enforcement mechanism is that within national law, you have automatic penalties, automatic stabilizers that would, if a country breaches the deficit target, for instance, would automatically lead to a correction of that, and therefore, lead to automatic national action. That's really what is new about this.

QUEST: Are you impressed with this treaty, or is it going to end up like the stability and growth pact? Nice language, will be broken by the big countries, and won't do the trick.

SCHULZ: Well, it is a bit different from what we've had before. It has the sanctions, but what is key is, it actually has the protection of the rescue fund with it. Only if you sign up for the treaty and if you comply with the rules, you will be rescued in case of a crisis. This really should be an incentive for governments to comply with it this time.

QUEST: We need to talk about the LTRO briefly. The most extraordinary amount of money was deposited last night at the ECB, more than $700 billion. We know where the money came from. It was landed -- lent out with the left and paid back with the right. When would you expect to see that LTRO money starting to flow?

SCHULZ: Well, this is really something that has to do with confidence and with growth building across the euro area. Only if banks see demand for credit, they will lend out money, and they will be very tough this time on checking whether the creditors really lent out to the right people.

So, this will take time. Only once the euro area as a whole returns to growth we will see considerable improvement in the credit conditions, as well.

(END VIDEOTAPE)

QUEST: And indeed, something that I learned today, if you look at the ECB's website and you manage to mouse and cursor your way to where you see those numbers, the amount of money on overnight deposit does not actually apparently reflect where it is being spent.

That's more a product of the ECB's own balance sheet. You have to look even further and know something about the underlying spending before you get to that number. We'll get to that next week as part of our further discussion of economics. A bit much for a Friday night.

Some of the LTRO shine has worn off, as far as European markets are concerned. They were flat, and only the DAX and the CAC current finished up on the week overall. Commodity prices fell, energy stocks in London headed in the same direction.

There are some signs the big ECB loans are being put to good use, and you see that if you look at Spanish and Italian bonds, which are both below 5 percent, which is the reaction that Mario Draghi at the ECB had hoped, 4.9, 4.9 will be very welcome by those central banks.

Wall Street is yelping for joy.

(BEGIN VIDEO CLIP)

(CROWD CHEERING)

(NEW YORK STOCK EXCHANGE BELL RINGS)

(END VIDEO CLIP)

QUEST: There's a new tech IPO in town, and this one seems to be going rather well. We'll be in New York after the break.

(COMMERCIAL BREAK)

QUEST: Now, it's used to hosting the reviews. Yelp.com has got rave reviews of its own. It's the latest big website to go public and, on day one, shares are up more than 60 percent. This is Yelp, a site combining social networking with local businesses. That is the European stock market.

The reviewers have raised more than $100 million. Shares were priced at $15 each. Now, they're closer to $25 a share.

Shares in -- well, my word. A bit of indigestion there. Zynga are also up in New York. That's the New York market, which is showing down 14 points at the moment.

The online games company makes games like Farmville, and now it's building its own virtual community, zynga.com, away from its usual home of Facebook. Zynga shares are up more than 40 percent since the IPO showed just how much money it was making.

As for the Dow -- there. There we are. We have the right one at the right time. The Dow is down 13.5, $12,966. Doesn't look like $13,000 is going to be on our agenda for today.

Alison Kosik is in New York. I am embarrassed, Ms. Kosik. Well, yes, you may well find --

ALISON KOSIK, CNN CORRESPONDENT: You?

QUEST: I know, you may find this surprising, but I had to look up Yelp.

KOSIK: I am surprised.

QUEST: I had to look up Yelp to see what they did, let alone to know why they should have this meteoric rise.

KOSIK: You know what? You couldn't have put it in any better way. And you're not alone, Richard. I've talked with several traders out there today who were buying shares for their clients today and saying, "You know what? I had to look up and figure out what Yelp did as well," because no one really understands what it does.

So, what it basically is is it gives reviews for services and businesses and restaurants in your local area here in the US, at least. So, let's say you go -- you want to go to a spa, you want to go to a restaurant, or use a business. Chances are, you may find it on Yelp, and you get sort of people giving their opinions and you can sort of figure out whether or not you want to go to that place.

OK. So, with that in mind, Yelp goes public today. Traders I talked to said, you know what? It was priced right. You know that, because look how much Yelp is spiking right now, 64 percent, shares are trading for $24.63.

OK, but here's the problem with Yelp, according to traders that I've talked about. They're calling what you're seeing just a lot of irrational exuberance because Yelp has yet to turn a profit and hasn't really said how it's going to in the future --

QUEST: Oi!

KOSIK: In fact, I've got to tell you. This -- to add to this, how do you like this? When Yelp went public back on the trading post behind me, where I'm stand -- where I'm sitting right now, one of the traders I talked to said he was sitting there or standing there, ready to buy in, right when the shares went public.

And he whispered to his buddy next to him saying, "Why are we buying this? I'm so confused. How is this company going to make money?" Richard?

QUEST: Oi, oi, oi, oi, oi! Ms. Kosik, I feel a bout of indigestion with the memory of the dot --

KOSIK: Oh, did you buy in this stock?

QUEST: No! No, no, no. I mean with the dot-com --

KOSIK: Oh.

QUEST: -- bubble of the 1990s that we saw these companies that had no revenues, that were on so-called path to profitability that nobody knew what they did, that they were selling dog food at cheaper -- more expensive than they could buy it or whatever.

I mean, their models were pathetic. Are we seeing a repeat of this with what we're now looking at?

KOSIK: You know what? It's kind of -- when you compare it to the 90s, I know what you're talking about, the big tech bubble. It's hard to call what's happening now a bubble, because if you look at the way these stocks have performed, most of them are just slightly above or below their IPO prices.

Angie's List is probably Yelp's closest publicly traded competitor. It's trading slightly below the IPO price. Groupon is down 5 percent year- to-date and 25 percent since the debut. Groupon, of course, reported that fourth quarter loss recently that was a big disappointment.

Linkedin is on a roll. It's up 35 percent year-to-date. But that has it trading just a few dollars -- about the IPO price. That one maybe had a lot of hype on IPO day.

But you know what? I think you're not really seeing the same level of excitement from the dot-com bubble of the 90s compared to now. And you know what, Richard? It's probably a good thing, because maybe investors learned a lesson from the 90s.

QUEST: Probably a good thing for my indigestion as well. All right, Alison Kosik, have a lovely weekend.

KOSIK: Perhaps.

QUEST: See you next week.

Talking of indigestion and things, from luxury to emergency. It's been a tough couple of months for Costa Cruises. In fact, we ask the question, what happens to the total cruise industry? After all, when one ship suffers, is everyone left at sea?

(COMMERCIAL BREAK)

QUEST: Technicians are investigating the cause of the fire which crippled the Costa Allegra cruise ship. A thousand people were onboard when it cast adrift in the Indian Ocean for four days. It's part of the same fleet of the Costa Concordia. That's the ship, you'll remember, capsized off the coast of Italy, killing at least 21 people.

When the Allegra finally made it to the Seychelles on Thursday, CNN's Senior International Correspondent Dan Rivers asked passengers to describe their ordeal.

(BEGIN VIDEOTAPE)

DAN RIVERS, CNN SENIOR INTERNATIONAL CORRESPONDENT (voice-over): Emerging from the sweltering haze of the tropics, the Costa Allegra was towed into the Seychelles by a French fishing trawler, a rather ignominious end to what should have been a luxury cruise.

But for the last three days, life aboard has been anything but luxurious. Passengers forced to camp on deck after a fire knocked out all power. Helicopters had to drop food.

But for American couple Gordon and Eleanor Bradwell, the whole experience was summed up in one word.

GORDON BRADWELL, PASSENGER: Unpleasant, obviously, because we did not have sewage, we did not have showers, no access to water, fresh fruit, food. We ate cold sandwiches for four days. The intense heat was a problem.

RIVERS (on camera): After three days with no electricity, limited food and water, the passengers are now finally ashore, some of them describing their time onboard as horrific.

DAVID TINSON, PASSENGER: It's complete incompetence disguised by very, very good luck. That's what's happened. And that's the only reason why there's lots and lots of people still walking around with us now.

MARI ANNE THON, PASSENGER: When we were up on the deck, and it was extremely black smoke, and so we knew something was going to happen. So -- excuse me. They sound the alarm. So, then we went out to our room to get our life jackets.

RIVERS: Are you happy to be ashore? How do you feel now?

ALENA DAME, PASSENGER: Yes, yes. A little bit emotional, because I prefer to go home. I am not in the mood to stay on holiday.

RIVERS (voice-over): But two thirds of the passengers are taking up Costa's offer of a free holiday on the Seychelles and a refund with a cash payment.

Costa Cruises is already facing a class action after another of its ships, the Costa Concordia, went aground in Italy in January, leaving at least 21 dead. They must be hoping this latest incident won't also result in litigation.

RIVERS (on camera): It's been a pretty bad start to 2012 for Costa. Can your brand recover?

NORBERT STIEKEMA, EXECUTIVE VICE PRESIDENT, COSTA CRUISES: I am absolutely sure. I think the Costs Concordia was clearly an incident -- a human error. With the Costa Allegra, there's a technical incident, and I think here we had the opportunity to show basically that we're watching out in case of an emergency like that how we handle it.

RIVERS (voice-over): But it's all prompted more questions. How did the fire start? Why did a backup generator fail? And was poor maintenance rather than human error to blame this time?

Dan Rivers, CNN, on the Seychelles.

(END VIDEOTAPE)

QUEST: So, first the Concordia and, now, the Allegra. I turned to Simon Calder, who's the travel editor of "The Independent" newspaper. One of the best in the business, he is. And I asked whether he thinks the wider cruise industry could now be hit badly by Costa's problems.

(BEGIN VIDEOTAPE)

SIMON CALDER, TRAVEL EDITOR, "THE INDEPENDENT": What the problem is for Costa Cruises in particular and the wider cruise industry in general is the way that these things have come about just six weeks apart.

The incident most recently for the Costa Allegra is actually nothing unusual. It happens several times every year that there's a power problem, might be caused by a fire. No one hurt. Very uncomfortable three days, of course, for the passengers and crew. But they'll be well compensated for it.

The big problem is that for Costa Cruises, the image of the company, I'm afraid, is still that stricken ship, the Costa Concordia, and the public face of the company is still Captain Schettino.

QUEST: Right. So, Costa is to one side in that respect. But what about the industry overall? Are you seeing prices of cruises falling dramatically? Is this the time to get a bargain?

CALDER: Well, it most certainly is. Now, if you talk to the individual cruise lines, they mostly say, "Yes, we had a few problems immediately after the Costa Concordia event, but bookings have now returned."

I'm not absolutely sure that they're anything like on the trend they need to be to fill these berths. Remember that the cruise industry isn't like the airline business or the car rental or the hotel trade. It requires a 100 percent load factor. It has to get people on all those berths on all those sailings of all those ships. And the only way to do that is, of course, to discount.

So, typically, you would find that one person per night on a cruise ship costs around $150. I've seen prices below $100 for top quality ships in places that you will want to be.

QUEST: OK, so would you expect, then, the cruise industry to go on a PR offensive now? Because discounting will only go so far. But at the same time, we know from our experience, Simon, that memories are short.

CALDER: We do. But unfortunately, they keep happening for Costa Cruises --

QUEST: Oh!

CALDER: -- tomorrow, the pretrial hearing begins in Italy of Captain Schettino. That's going to put Costa Concordia back in the headlines just as Costa Allegra has finished.

The problem for the cruise industry isn't the majority of very sophisticated regular cruisers who know just how safe the industry is, and they know that this is just a one-off. It's for the new people. People who were considering a cruise who may now say, thanks very much, I'll stay on dry land.

QUEST: I know you like a bargain. You're the man who pays his own way. So, are you -- where are you looking to get a -- ?

CALDER: Already booked it. Eastern Mediterranean, I sail a month today.

(END VIDEOTAPE)

QUEST: I might have known Simon Calder would not miss the opportunity to take advantage of a bargain. And where Simon's going, the rest of us probably should follow.

Oil prices up 16 percent this year. Analysts are talking about the new Greece.

(RINGS BELL)

QUEST: In a moment.

(COMMERCIAL BREAK)

QUEST: Hello, I'm Richard Quest.

More QUEST MEANS BUSINESS in a moment.

This is CNN. And on this network, it is the news which always comes first.

An amateur video from Syria is said to show a protest in Homs in support of Baba Amr, the neighborhood nearby, where the Syrian Army is still not allowing aid in. Activists report Syrian troops are rounding up men and boys described of fighting age, some as young as 12.

Iran's supreme leader was one of the first voters to cast a ballot in Friday's parliamentary elections. Some 3,400 conservative candidates are competing for 290 seats. They were all pre-approved by Iran's Guardian Council and the first result is expected on Sunday.

In Brussels, 25 of the EU's member countries have signed a treaty on financial stability aimed at putting a cap of overspending by member nations. Only the U.K. and the Czech Republic opted out of the pact.

A new round of tornadoes and damaging storms is now pummeling the south-central United States. The states of Alabama and Tennessee have been hit. Today's outbreak and two -- one two days ago have been unusually powerful and they came around two months earlier than normal.

As one crisis comes to an end, just another one seems to begin. And this time, it is oil. Brent crude is up 16 percent this year. And some analysts say it won't be long before it hits $150 a barrel.

Join me at the super screen and you can see Brent over the fierce supply and demand. If we begin with the supply issue, this is when the EU banned Iran's oil imports. And that pretty much is the starting point, if you like, of the process.

We then get this sharp, sharp run-up in prices over fear -- and that's again Iran, this time when it announces it's stepping up uranium enrichment. But more than that, we get a bit of a wobble. It goes down a bit. And this one is interesting because the downward trend is demand. If prices are going up, as they have been, does that demand destroy, of course, economic growth and cause -- bring that into you know?

And so we go back up and we tootle around. Some economists, like HSBC's Stephen King, are now suggesting in a report out just today that oil is the new problem that markets should be focusing on. It appears now Greece is under control.

John Netto is the founder and president of M3 Capital.

He joins me from the NYMEX in New York.

I've read at least three analysts' economic report today, all saying that what we are seeing with the price of crude, is the new serious problem for the markets and for economies.

Do you subscribe to that?

JOHN NETTO, FOUNDER AND PRESIDENT, M3 CAPITAL: I do. If you look at history over the last 35 years, we've seen that crude has been a great harbinger, or at least an oil shock has been a great harbinger of a forthcoming or pending recession.

And I think when you look at the price action in this market, Richard, that, oxymoronically, the -- the market is anticipating an oil price shock.

QUEST: So, what -- you say that, though, but what's driving that shock?

Is it the issue with Iran and the Straits of Hormuz or -- or whatever it might be with Iran?

Where is that shock coming from?

NETTO: Well, a couple of fronts. The Straits of Hormuz is obviously a key chokepoint when it comes to the shipping of -- of Brent out of that area. Also looking at a number of the potential issues with -- with Israel, issues there. We saw President Obama this morning come out in an interview with "The Atlantic," talk about a surprise attack was, was out of the cards and just off of a geopolitical risk how -- how crude pulled back off of that...

QUEST: Right.

NETTO: -- and how WTI pulled off of that.

But net-net, though, if you look at the WTI-Brent spread, Brent continues to outperform. And that's a reflection of this concern.

QUEST: OK, at what point -- and I've seen various numbers about an increase in whether it's Brent or WTI and how much that knocks off GDP. There's all sorts of formulae -- formula that we can use.

But, John, where do you believe, at what price does the price per barrel become a danger to growth?

NETTO: Oh, the $138 to $140 level. We closed today at $124. It's interesting, because there are a couple of factors that we, as energy traders, want to look at, Richard. These markets have become amazingly coupled in a lot of ways. And that whole risk on dynamic has benefited crude over the last three years. It's benefited Brent over the last three years. And when we look at Brent near all -- near multi-year highs and we look at the S&P near multi-year highs, that may not be intuitive to a lot of people, but it does reflect a longer-term perspective...

QUEST: Right.

NETTO: -- for the two can coexist as long as the increase in Brent isn't too far and too fast.

QUEST: We'll talk more about this in the weeks ahead.

Good to have you on the program for the first time.

NETTO: Thank you.

QUEST: And we'll certainly have you back again.

John, many thanks, indeed.

John joining me from New York.

It is a fairly appalling time in the United States when it comes to to the weather, these tornadoes and storms.

Jenny Harrison is at the World Weather Center.

Good evening.

JENNY HARRISON, ATS METEOROLOGIST: Yes, Richard, another very bad day. Not a good end to the week at all. And by no means have we seen the worst of the weather so far this Friday across the United States.

This is where all the warnings are in place now. These are the watches I'm showing you here. The red boxes are the tornadoes, the yellow indicating severe thunderstorms.

And I'm just going to actually switch across to a different computer so that I can actually show you. You can see here, this is a zoomed in view of literally one line of thunderstorms within that mass that you saw. These warnings, these red boxes, these are tornado watch -- these are warnings. These are tornado warnings.

So this is where a tornado has already been spotted on the ground. And this is warning this particular neighborhood that there is very likely a tornado on its way.

So right now here, we could well be hearing the tornado sirens, if they're actually operating. And then you can also see, look at the hail. You can actually see much more information. I've obviously got the strength of the winds, as well. But also, look at this hail, one point -- I can't read it -- 1.62 inches, I think it says. So that's hail getting on to three-and-a-half centimeters. You can see there, 1.4 inches.

So we've got the damaging hail, we've got the strong winds, tornado watches that are also in place. And, as I say, all of that is continuing to work its way eastwards.

Now, so far, these are the reports we've had through. And the numbers do keep fluctuating. In fact, right now, there are 17 reports of tornadoes. They are preliminary reports and very often it's one tornado that's touched down in various places. Alabama, Northern Alabama, there has been reports of damage up there because of a tornado, a suspected tornado.

But this is, I think, again, probably the most shocking aspect, at the moment, of these storms, is because the area that these storms are working their way through is so very, very vast. This whole area here is the size of Spain, France and Germany combined. Seventy-five million people actually live here. And right in the center, about four million people are actually at high risk. And it's very rare, certainly this early in the season, to have any areas under high risk. But that is the -- the concerns for this particular day. It's going to get worse, Richard. The heat of the day is going to continue to rise the next two to three hours. And that is when we're going to see the more really strong thunderstorms in the exact same area that we saw the thunderstorms and the damage with the tornadoes on Wednesday, literally just not even really two days ago.

QUEST: Jenny, serious stuff.

Thank you for that.

We appreciate it.

Jenny Harrison is at the World Weather Center.

In a moment, Barcelona and those mobile phones.

(COMMERCIAL BREAK)

QUEST: Cisco says there will be more mobile Internet devices on the planet than people by the end of this year. So it's about time they started taking care of us.

This year's Mobile World Congress in Barcelona is all about connected living, as Jim Boulden explains.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: We anticipate there will be about 24 billion connected devices in our lives by 2020. So everything is going to be connected. Every electronic device you can think of is going to be connected by mobile. And you'll be able to control it really effectively to enhance your life.

JIM BOULDEN, CNN CORRESPONDENT: So give me some examples.

UNIDENTIFIED MALE: So why don't we open the door?

BOULDEN: OK.

UNIDENTIFIED MALE: So I have a door lock module here. If I pick up the door lock, you can see the door is locked. If I hit the unlock button, that will open the door for us, you see?

And in we go.

BOULDEN: So this is the living room, I take it, the connected living room?

UNIDENTIFIED MALE: We're in the connected living room.

BOULDEN: OK. I can think here, of course, you think of TVs, you think of stereo systems, technologies that are around now.

But what more?

UNIDENTIFIED MALE: Well, how about a fire?

BOULDEN: A fire, OK.

UNIDENTIFIED MALE: Right behind you.

BOULDEN: All right.

UNIDENTIFIED MALE: Let's turn the fire on.

BOULDEN: OK. So I can light the fire. I can unlock the door. I can pull up my shades. But I can also do that without that.

UNIDENTIFIED MALE: Sure.

BOULDEN: Why do I need that?

UNIDENTIFIED MALE: I think this is just an example of the sort of things we're seeing today, Jim, as we talk about, you know, 20 billion connected devices...

BOULDEN: Yes.

UNIDENTIFIED MALE: It's going to change everything in your lives, whether it's your health care, your smart metering, your utilities in your house, your car.

BOULDEN: Yes.

UNIDENTIFIED MALE: You're going to be connected and we're going to enhance all of those applications going forward.

BOULDEN: I think the smart metering is very interesting and a way for people to cut their energy costs. And something like that would actually work...

UNIDENTIFIED MALE: Right.

BOULDEN: -- and help cut...

UNIDENTIFIED MALE: Right.

BOULDEN: -- the sun coming in or the cold going out.

UNIDENTIFIED MALE: Right.

UNIDENTIFIED MALE: So this is a great example, Jim. This is the Zephyr BioHarness fitted to our appellate (ph). And what essentially is happening, that information is being transmitted over the wireless network. And you can see the results in terms of heart rate and vital signs here.

It's kind of a -- a simple example to show you. But I think the, you know, the -- the example really holds in health applications where doctors, through a remote from patients, can do this kind of monitoring.

BOULDEN: And we keep hearing, especially in the developing world, where people are not going to have a doctor in every village, but as they become more wealthy and they use their mobile devices...

UNIDENTIFIED MALE: Right.

BOULDEN: -- connecting to the doctor -- connecting to a health...

UNIDENTIFIED MALE: Yes.

BOULDEN: -- official is the important...

UNIDENTIFIED MALE: Yes.

BOULDEN: -- future for those apps.

UNIDENTIFIED MALE: No, exactly. Things like mobile stethoscopes for people who just cannot go for a physical.

BOULDEN: Yes.

UNIDENTIFIED MALE: They can look, they can check and you can get the quality you need over the mobile network.

(CROSSTALK)

UNIDENTIFIED MALE: Yes, this is a nice end to the tour.

BOULDEN: Yes.

UNIDENTIFIED MALE: So what I've got here, Jim, is actually a -- a social web of things. So, actually...

BOULDEN: Of things?

UNIDENTIFIED MALE: Of things. So these connected things that we have talked about are my friends in the social web.

BOULDEN: Ah.

UNIDENTIFIED MALE: So for instance, you can see here, my lights are talking to me. They're actually saying, you're not here and I'm on, should I turn the lights off?

I'll say yes, turn the lights off for me, please.

Having done that, it says, OK, cool. It asks me, do I want to see for myself, to see that they have actually turned the lights off.

BOULDEN: So is that a count -- a camera?

UNIDENTIFIED MALE: So we have a camera also connected.

BOULDEN: Right.

UNIDENTIFIED MALE: So it's going to show me a stream and I can now see that my lights are, indeed, on.

BOULDEN: Sure.

UNIDENTIFIED MALE: Because there's the light in the corner and it's not on.

BOULDEN: Yes. So connected homes, connected automobiles, connected health care, that's what they've been talking about here in Barcelona this week. The experts say some 24 billion devices will be connected by 2020, worth trillions of dollars in business. And all from the palm of your hand.

Jim Boulden, CNN, Barcelona.

(END VIDEO TAPE)

QUEST: To paraphrase the old saying, we're turning into a group of people who know the connectivity of everything and the communication of nothing.

That's QUEST MEANS BUSINESS for this week.

I'm Richard Quest.

Whatever you're up to in the hours ahead, I hope it's profitable.

MARKETPLACE AFRICA is next.

(COMMERCIAL BREAK)

ROBYN CURNOW, HOST: You're watching MARKETPLACE AFRICA.

I'm Robyn Curnow in Johannesburg.

This week, we look at the trade of a drug from East Africa that some believe has links to terrorism and an industrial dispute in South Africa that has led to a rise in global platinum prices.

Now, most of the world's platinum is found here, in Southern Africa. The world's second largest platinum producer is Impala Platinum, but a labor dispute has forced the company to dismiss 17,000 workers after an illegal strike. Four people were killed and at least 50 people were hurt in violent protests and attacks on employers who continued to go to work.

The strike began when 5,000 rock drill operators walked out in January when they did not get a pay increase. When other workers got involved, work at the mine ground to a halt and the dispute has cost the company an estimated $267 million in lost revenue. It also caused global platinum prices to rise.

This week, Julius Malema, the expelled ANC youth leader, visited the workers and after weeks of protests, the country's main union and the ANC government has urged the miners to return to work.

JULIUS MALEMA, ANC: You must remember to fight for your rights every time. But you must also remember, at government we don't want to (INAUDIBLE). We want to (INAUDIBLE) in employment supporting your families and yourselves.

CURNOW: This comes as the company is also being criticized by the Zimbabwean government for not handing over a 51 percent stake of its mining operation in Zimbabwe. So far, Amplats has only handed over 25 percent and offered 30 percent in equity.

Now, under Zimbabwe's Indigenization Law, multinational companies are forced to give up a majority stake to local black Zimbabweans.

Well, I recently sat down with Neville Francis Nicolau.

Now, he's the CEO of the world's largest platinum producer, Anglo American Platinum.

And I asked him how this indigenization policy was impacting his company.

(BEGIN VIDEOTAPE)

CURNOW: In terms of making money, in terms of strategic visions, all of that, in Zimbabwe, how do you -- how do you work in that kind of environment?

NEVILLE FRANCIS NICOLAU, CEO, ANGLO AMERICAN PLATINUM: Well, Zimbabwe is the only other major geology that -- that has platinum. Operating in Zimbabwe does have its challenges. It -- it's -- it's not like many other countries. But this is a country that's in transition and development.

So we work with the government and while we are welcome guests, we are happy to -- to produce good quality platinum.

CURNOW: But you've signed off on this sort of Indigenization Law.

NICOLAU: Oh, it's a process. So, you know, we've signed off on aspects of it. And we've made very good progress. And so far, so good.

I have no reason to believe that we will not conclude our -- our discussions positively.

CURNOW: In terms of being asked to do something like this indigenization process, which is effectively hand over half of your assets on the ground to a local black Zimbabwean, why do that?

NICOLAU: It's not a matter of giving away half of the company. These are -- even if they are facilitated deals, there is a normal commercial deal that takes place. But the transformation is very important, to get to a point where all Zimbabweans can compete as Zimbabweans.

CURNOW: How do you ensure that this transformation is -- is stuck to, that this is not some sort of political grab, that that j that those assets go to the right people?

NICOLAU: Well, the -- we -- we have quite a lot of say in terms of who we sell these assets to. The -- a lot of the -- a lot of those discussions are -- are public and -- and stock exchange company type of discussions. And so far, we have no real reason to believe that we are doing anything that is for a political purpose.

You know, we're doing it because those are the rules of the country that we operate in and we -- we operate accordingly.

CURNOW: And you've really had no choice, have you?

NICOLAU: Well, you can always sell up the whole of the assets and you -- and you can leave.

CURNOW: And leave?

NICOLAU: We don't think that that would be a great idea. Of course, we make profit, is that is the primary purpose of business. But for us to leave would leave people without the -- the capacity to be able to develop the mines and to improve the lives of the people around the mines.

Two thousand employees, very often you can multiply that by five to the number of people that -- that you are benefiting. And then, of course, we have all of the supply companies and people that manufacture stuff.

So there are a huge number of people directly on the ground that actually are benefiting from us being there. And we're happy to participate like that.

(END VIDEO TAPE)

CURNOW: Neville Francis Nicolau there.

He is the CEO of Anglo American Platinum.

Well, from platinum to plants, we take a look at how a ban on a major East African shrub is affecting the livelihoods of Kenyan farmers through (INAUDIBLE).

(COMMERCIAL BREAK)

CURNOW: For hundreds of years, the drug of choice in East Africa has been a plant called khat. When chewed, it gives off a kind of mellow high that many find addictive.

Well, the trade is worth hundreds of millions of dollars. In fact, many communities in Kenya are entirely dependent on this crop.

Well, khat has been banned in the U.S. and Canada and some European countries for health reasons.

But as David McKenzie now reports, many believe the ban was introduced because fear there is a link between the trade and terrorism.

(BEGIN VIDEOTAPE)

DAVID MCKENZIE, CNN CORRESPONDENT (voice-over): Edward Mutuura's Kenyan farm produces a key ingredient in many Somalia social gatherings across the world. He grows khat, a tree whose shoots and leaves, when chewed, produce a feeling of euphoria.

Every homestead in this part of Kenya seems to have at least one khat tree. And the whole region depends on khat for their economic survival.

But in January, the Dutch government announced a ban of all khat imports, citing health issues.

Mutuura says that the majority of their crop goes to the Netherlands, which has a vibrant Somalia community and is a key hub to other European countries.

EDWARD MUTUURA, FARMER: If the ban is -- is accepted or it is -- it is enforced, the whole Meru County, the whole Meru County, the economy of the whole Meru County will be crippled. The economy of this one of our population here, where khat is grown, will be totally crippled and the people have no source of income.

MCKENZIE: Many analysts believe that the Dutch ban has nothing to do with health concerns, but everything to do with terrorism.

UNIDENTIFIED MALE: You have businesses which terror organizations may not be running, but which end up benefiting these organizations.

EMMANUEL KISIANGANI, INSTITUTE OF SECURITY STUDIES: So ultimately, the contributors are doing this in good faith, but the end result is that you have people who have brung what is along in between, who take these resources, this money, and channel it to terror organizations.

MCKENZIE: The group in question is Somalia-based Al Shabab, an Islamic militant group affiliated with al Qaeda. For years, Al Shabab has been battling the weak transitional government and a recent U.N. report says that Al Shabab, a designated terrorist group in the U.S. and U.K., gets funds by taxing the khat exported to Somalia.

Analysts believe that the khat trade in Europe may be following a similar pattern. They believe that some of the businessmen in Europe who act as middlemen to exporters and farmers, could be funding Al Shabab.

(on camera): Khat in Kenya is perfectly legal and it's widely available. This bundle costs around $20 US. But it's impossible to know exactly how much the export industry earns each year. One government official told us it's as much as $100 million per year.

But this industry is highly unregulated because of the stigma surrounding this crop, so it's impossible to have a fail-safe buffer between the industry and terror groups.

(voice-over): On the consumer side, khat has very little to do with terror. For centuries, it has been chewed for its stimulating properties. It's a cultural and social activity in many communities in the Horn of Africa and parts of the Middle East.

In Europe, khat is mainly chewed by the Somalia diaspora, even though it's illegal in several countries.

That demand has opened up a vibrant industry in fertile parts of Kenya.

Everything about khat involves speed, because it spoils in one to three days. Khat is sorted, wrapped in banana leaves, haggled over by transporters and rushed to the capital, Nairobi, and out of the country.

The farmers, who are separated from the end-user and any regulation further down the chain, are bewildered by the Dutch ban.

UNIDENTIFIED MALE: There are legitimate businesses whose end product may end up in the hands of Al Shabab. Yet if governments resort to banning these businesses, then it hurts the ultimate owners of these businesses. I think it is a tricky situation. It's a precarious balancing act that somehow, perhaps, we need to think -- or, rather, governments need to think of mechanisms that ensure that these legitimate businesses don't end up benefiting these terrorist organizations.

MCKENZIE: But the perceived threat of khat could kill off this region's economic future.

MUTUURA: Khat farming is -- is -- is the heart of the economy of this place. And the occasion, we cannot educate our children without khat. If we don't have khat to sell, it means that our economy is grounded.

MCKENZIE: The Kenyan government says it is in talks with the Dutch to reverse the ban on khat. The farmers here hope that those talks bear fruit.

MUTUURA: This is only what we know in our life. Nothing more.

MCKENZIE: Or their livelihood will be plucked away.

David McKenzie, CNN, Kenya.

(END VIDEO TAPE)

CURNOW: This week marks our hundredth show. Check out CNN.com/marketplaceafrica, my special blog and our favorite Marketplace Moment. There's also a link to our Facebook page, featuring some behind the scenes photos and more on our hundredth anniversary.

OK, that's our show for this week.

But for me, Robyn Curnow, here in Johannesburg, see you again next week.

END