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Quest Means Business
Growth Plan for Europe; ECB Makes Collateral Compromise; IMF Bank Recommendation; Reaction to Moody's Bank Downgrades; New Greek Finance Minister Taken to Hospital; Chinese Tennis Star Li Na; The Business of Women's Tennis
Aired June 22, 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: United we stand. The eurozone's Big Four as one when it comes to eurozone growth.
Backward-looking and biased. Banks hit back at their Moody's downgrade.
And glam, Slam, thank you, ma'am. Women tennis players top the sporting rich list.
I'm Richard Quest. It may be a Friday but, of course, I still mean business.
Good evening. A united front with a common message: the euro is here to stay, it is irreversible. The leaders of France, Germany, and Italy, and Spain giving that exact message, and now, pushing a plan to set aside $160 billion to get Europe growing again, though divisions between the four are far from resolved.
Italy's prime minister, Mario Monti, welcomed Chancellor Merkel, Francois Hollande, and Mariano Rajoy at this mini summit in Rome and vowed to lift Europe out of the crisis with a plan to boost growth and create jobs.
Mrs. Merkel said the plan had her backing. President Hollande said all four leaders were on the same page when it came to growth.
(BEGIN VIDEO CLIP)
FRANCOIS HOLLANDE, PRESIDENT OF FRANCE (through translator): We spoke about the essential package of growth. A figure was given, of one percent of European GDP, which has to be mobilized with a timetable that has to be as soon as possible.
(END VIDEO CLIP)
QUEST: Now, today's summit was more about commitments than details, and there wasn't total agreement on the policies. Over here in the library, you'll see the detail. All four, it's 130 billion euros, $160- odd, in the growth plan, one percent of GDP.
They also agreed on a financial transaction tax, which won't go down well with the UK outside the eurozone. No progress on euro bonds. President Hollande insists there's no transfer of sovereignty without more solidarity. So, they're all pretty much agreeing that they want more Europe.
Now, towards the immediate crisis, the ECB is now saying it will accept lower-grade collateral from certain banks in certain situations. They have lowered it, now, to accept Triple-B securities. Basically, as collateral has become harder to get, they're using more of it up, so the Triple-B securities.
But if the banks pledge to Triple-B securities, they will have a 26 percent haircut. In other words, you will have to give 26 percent more collateral than the loan. That's the buffer, in case things turn sour.
So, how did it all go? Christine Lagarde at the IMF. She says there should be some short-term solutions. Banking unions should be a priority and the bailout money shouldn't have to go through the sovereign, but it could go directly to the banks.
That's important for Spain, because at the moment, the money going by the sovereign government would add to Spain's deficit for central government. And she says the ECB bond-buying may be needed.
When we put all this together -- Jim Boulden is with me -- a busy day.
JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT: Yes.
QUEST: A growth plan, a collateral relaxation, everybody talking. But this is really what they've been talking about. They are talking about the Moody's bank downgrades, which you can help me understand.
We've got downgrades all over the place. We had them in the United States -- well, you --
BOULDEN: Yes. Certain Canada, of course.
QUEST: There you are. The United States: Morgans, Goldman's, Bank of America, CitiGroup, Morgan Stanley.
BOULDEN: What was so interesting to me is that Morgan Stanley's downgrade wasn't as bad as expected, and we saw the share prices jumping on Thursday. So, Citibank -- CitiGroup, for instance, was very unhappy about this, saying "backward-looking."
QUEST: Right. We had -- I'm just going to go through some of the countries that we've seen. We had Canada, where it was the Royal Bank of Canada. We had the UK, loads of them in the UK: HSPC, Barclay's, Royal Bank of Scotland. Banks all over the continent were being downgraded. How serious are these downgrades?
BOULDEN: I think I agree with the banks. This is backward-looking. The banks are saying that this is -- because of what's happened in the last few months, Moody's is kind of behind the curve, and they have to come out with these reports. It takes them months to come out with these reports. We knew back in February this was going to happen.
QUEST: You were talking about that. Look what Citibank had to say.
BOULDEN: Yes.
QUEST: Strongly disagrees with Moody's. They say it's "arbitrary and completely unwarranted."
RBS in the UK: "The group disagrees with Moody's ratings change. It is backward-looking," they say.
BOULDEN: Yes.
QUEST: But even so, this is going to have an effect on the banks.
BOULDEN: Yes, it does. It -- and of course it costs more for them to then go into the markets and borrow money. What's interesting, though, is that the stock markets ignored it, investors ignored it. We saw many of these shares higher on the day.
QUEST: OK. But back to the graph. And if we look at the graph, with so many core areas in trouble here, Jim, you can't surely ignore it.
BOULDEN: No, I think what was interesting is that the US banks were particularly upset, they said, relative to the number of banks that were actually downgraded in Europe. They thought more European banks should be downgraded, because this is were the -- most of the problem exists at the moment.
QUEST: Finally, Greece's new finance minister. I mean, we wish him well. But he was taken -- he fainted and was taken to hospital.
BOULDEN: Yes, he --
QUEST: Now, he was the head of the Central Bank, so he's used to pressure.
BOULDEN: Yes.
QUEST: It's not like he suddenly sort of --
BOULDEN: No. He hadn't actually been sworn in yet, so -- because the current finance minister went to the meetings in Luxembourg. He was supposed to be sworn in today, went to the hospital, they said, with abdominal pains.
Interesting, the prime minister is going to the hospital tomorrow to have his eyes fixed. So, both of them in the hospital on Saturday.
QUEST: Jim Boulden, thank you very much, indeed. We thank Jim for that.
Now, if we put this into the context of what was happening in terms of the whole environment, David Bloom of HSBC is not buying Europe's grand plan for growth. He's the bank's head of foreign exchange strategy in London. I asked him for his take on what the big four had cobbled together today in Rome.
(BEGIN VIDEOTAPE)
DAVID BLOOM, GLOBAL HEAD OF FOREIGN EXCHANGE STRATEGY, HSBC: I am totally underwhelmed. There is no grand plan. If we already knew how to get growth, let's have it. We would have had it already.
So, these smoke and mirrors are just there. We've got underlying structural problems and these need to be solved. And if we could have had a magic bullet for growth, we would have fired it long ago.
QUEST: Right. So, they're going to come up with a plan because they've got to have a growth component to counter the austerity.
BLOOM: Yes. And I think that's much more politically acceptable. But in the end of the day, it's structural change that Europe needs.
QUEST: All right. So, as we come to the end of this week, where we've had this -- now this plan from the four, we've had Greece voting for pro-euro policies.
BLOOM: Yes.
QUEST: Are we in a better position at the end of this week than we were at the end of last?
BLOOM: We're in a slightly better position that we're moving forward, but don't forget, in this week, the Fed talked about QE3, so that means the US economy's slowing. The Bank of England is talking about another $15 billion to $25 billion of printing. And we've got this. So, it's a right old mess. Five and a half years into a crisis.
QUEST: And the right old mess comes about because the solutions are simply too politically difficult to ramrod through, aren't they? They are the monetary fiscal economic union.
BLOOM: Yes. So, in Europe, the way it works is you're threatened with default, you're threatened with Armageddon, then you make a change, then the ECB acts. So, it's a course of action that is quite death-defying as we move towards it.
QUEST: The Philly Fed was depressing. The Fed gave its -- lowered its economic forecast. But we've known that the US was slowing down, originally from 2.4 to 2.2, and then on downwards.
BLOOM: Yes, we have known it was slowing, but now, the reality is striking that the US economy is now starting to slow a little more aggressively than we thought. We're heading into QE3.
Everyone thinks the Fed needs to act by the end of July, otherwise they don't want to be seen helping the Democrats or hindering the Republicans. So, we're getting some political mire, there. So, everyone's looking for the Fed to act sooner rather than later, because this political atmosphere is going to get stinky when it comes to the US.
QUEST: HSBC asset allocation -- I got some of --
BLOOM: Yes.
QUEST: You may have seen it this morning. Once again, talks about going -- putting 5 percent more weight onto high-yield credit, out of equities and into high-yield credit. That's --
BLOOM: Well, we think that basically these credits aren't going bankrupt, but on the earnings certainly won't be what markets expect. So, if you think the company will survive and pay its interest rate, you own the credit bond. If you think the company's going to make lots of money, you want to own the equity.
So, we're saying these companies will survive, but the amount of earnings that they'll make are a lot less, so we're switching out of that hear-beater, growth type of environment. In other words, we don't believe this whole growth story. But we believe in the solvency story.
(END VIDEOTAPE)
QUEST: That's David Bloom of HSBC. As you can see, it may be Friday, but the eurozone crisis was with us right until the end of the trading week.
QUEST MEANS BUSINESS after this break, Spain is to ask for a multibillion-dollar handout. We expect that on Monday. The IMF says it's not a matter of how much, but how it gets there.
(RINGS BELL)
COMMERCIAL BREAK)
QUEST: Spain is about to grasp the lifeline thrown to it by the EU to prop up its failing banks. On Monday, the debt country will probably formally ask for help.
It's already flagged up roughly how much it needs, 62 billion euros is what the independent successors say is the amount needed to make up the losses from Spain's massive -- from Spain's massive housing bust. That's much less than the 100 billion euros likely to be offered from the eurozone.
Even so, the IMF is skeptical. The IMF says the aid needs to go straight to the banks, not via the government, because that, of course, would raise the debt load for the sovereign.
Spain's debt crisis goes beyond the banks. Its regional governments are deep in the red, too. Catalonia is the worst-off region, or one of them. And paradoxically, one of the wealthiest. Its president, Artur Mas, has appealed to the state for help in refinancing his region's debts.
President Mas joins me, now, from New York. Sir, thank you for joining me. The situation in Spain -- a lot of the problems we understand come about because the regions have spent too much and have not been as fiscally prudent themselves. Is that fair?
ARTUR MAS, PRESIDENT OF CATALONIA: Well, it is -- it is bad, but we are trying to overcome the situation. We are crossing very difficult times in Europe as a whole, but especially in the south of Europe. And we belong to the south, so we are crossing these difficult times, but we are trying to overcome the situation.
And don't forget that within the south of Europe, there are regions, there are lands, there are territories that are doing quite well, and I think that Catalonia is one of these examples, one of these positive examples.
QUEST: Right. Right. But when you look at Spain, it is this problem between the central government and the regions and the way they have spent that has caused many of the difficulties today, isn't it?
MAS: Well, but don't forget that in the case of Catalonia, if you compare the money we send to Madrid every year and the money we get back from Madrid, there is a difference -- a near difference of $20 billion. That is equivalent to our 8, 9 percent of the Catalan GDP.
This is a huge burden. Apart from that, it is said that we are responsible for the debt, for the Spanish debt, but this is not true, taking into account that if you -- analyze the regional debt in Spain, you will reach the conclusion that the total burden of the debt at the regional level is 13 percent, only 13 percent of the overall Spanish debt.
QUEST: So, if and when the Spanish government asks next week for 100 billion or whatever, where will you in Catalonia stand on this? Because obviously, a strong central banking industry is crucial for Catalonia as much as the rest of Spain, isn't it?
MAS: It is, it is, as you've said. I agree with you. I fully agree with you. But in this sense, take into account that Spain is trying to take the decisions now that other countries took three or four years ago.
Take the example of the United States of America, of the United Kingdom, Germany, Belgium, the Netherlands. All these countries three years ago decided to put huge amounts of money --
QUEST: Right.
MAS: -- on their system, on their banking system. And now, Spain has to do the same. That was a mistake not to do that three years ago, but finally, in the end, these kind of decisions had to be taken.
QUEST: Mr. President, we thank you for joining us. Next time you and I talk, I hope it's not in New York but in the delightful region of Catalonia, where we can discuss these matters in your own home territory. That would be lovely.
MAS: Thank you very much. I will invite you to go to Barcelona and Catalonia. You will see --
QUEST: I assure --
MAS: -- that it's a lovely -- lovely country and a lovely city, too.
QUEST: I assure you, I am no stranger to Barcelona, and I look forward to my next visit. Many thanks, sir, for joining us. I tell you, that's one invitation I don't need to have to wait too long before I take up. Paying my own way, of course. A Currency Conundrum, now.
(RINGS BELL)
QUEST: After World War II, one koruna stamp was stuck on a one kronen not from Austria and Hungary. Why? A, to increase the note's value? B, to indicate a payment of tax? C, to transport the note into the first currency of the newly formed Czechoslovakia? All right, if you get the answer to this right, you really do need to get out more.
The rates tonight: the US dollar's losing a little against the euro thanks to weaker US data. Sterling is steady, 1.55, and the yen, the greenback is hovering at the five-week high. Those are the rates --
(RINGS BELL)
QUEST: -- this is the break.
(COMMERCIAL BREAK)
QUEST: Wimbledon starts on Monday, and at stake for men and women is prizes of $1.8 million. When it comes to the highest-paid female athlete, it is the tennis players who dominate the top ten.
Number one is number one seed Maria Sharapova. She's 25 years old and she campaigns and sponsors of Evian, Samsung, TAG Heuer, and Cole Haan. The deal with Nike guarantees her $70 million over eight years.
As for female tennis overall, seven of the top nine female players are tennis players, according to Forbes. The emerging markets are hugely, hugely important. The WTA, like all global companies and brands, wants to increase the presence of the sport -- and we'll talk about that in just a moment -- particularly in the BRICs.
And one tennis player leading the charge for that is Li Na, who earned $8 million in 2011. The 30-year-old rocketed to fame and fortune because she won the 2011 French Open title. She because Asia's first Grand Slam trophy.
Now, since then, she's failed to win any other trophy and has not gone beyond the fourth round. But nonetheless, when it comes to sponsorship, Li Na is the place to be.
(BEGIN VIDEOTAPE)
QUEST: So, what sort of form are you on this year for Wimbledon? How's your fitness, how's your strength this year?
LI NA, 2011 FRENCH OPEN CHAMPION: Starting the beginning of the year, starting the first tournament until the French Open, I was happy what I'm doing on the court, but of course, last year's my best year I've done. But I would prefer -- much prefer for this year to stay at the same level.
QUEST: One tournament made a huge difference last year, didn't it?
LI: Yes. It is. I was feeling after the French last year, my life was totally, totally changed. Like, I even -- because winning a grand is a nice dream for me. But I never think about after you win a Grans Slam, so many things come to your life. I never think about that before.
Like, I would like to say, OK, first, sponsor. And -- because I think I have a good agent, so he does everything for me. End of last year, they have their one meeting, all sponsors together. So, I was coming out saying, "Wow. How many sponsors I have?" Yes, I think I have a lot, around 11. Yes.
QUEST: Do you have much say in which sponsors you want to go with?
LI: I still remember one time, my agent was asking me, "Do you like ice cream?"
I said, "Yes, I like Haagen Dazs." And two months later, he found Haagen Dazs.
QUEST: You must be really important.
LI: I mean --
QUEST: Because your shirt is the only one that is allowed to -- you see --
(LAUGHTER)
QUEST: You know what I'm going to say.
LI: Yes, with the badge, right? Nike.
QUEST: You're the only one that Nike lets have other patches.
LI: Yes.
QUEST: Why is that?
LI: Different? Special?
(MAN SPEAKING IN CHINESE)
QUEST: The key to your difference, besides your tennis -- you know this and I know this -- is China.
LI: Yes. A first.
QUEST: China is -- as with everything else -- it's the new big playing ground, isn't it?
LI: Yes. I think tennis in China, they didn't have so many years. I think tennis, now, in China's still like -- like children. You have to grow up. Not like Western, we say hundred or even more in the hundred years already. They have tennis history.
QUEST: Why is tennis becoming more popular in China, do you think? Why is it now becoming more popular? Is it because of people like yourself?
LI: I think -- I will not say only myself. I think tennis started getting better was like 2004. The doubles team, they won a gold medal for the Olympics. After, the people were more interested in tennis.
QUEST: You are the second-highest paid female athlete in the world. Do you ever think about that?
LI: No. Really, never. But I really want people to focus on my tennis, not only say how much money is she making.
(END VIDEOTAPE)
QUEST: Stacey Allaster is the chief executive of the Women's Tennis Association, and it is always --
STACEY ALLASTER, CEO, WOMEN'S TENNIS ASSOCIATION: Yes, it is definitely a pleasure, Richard, to be with you.
QUEST: OK. So. Li Na, we've just been hearing, women's tennis -- you and I have talked before about the growth of it. What is driving that growth? All of a sudden?
ALLASTER: Well, look. I think great stars like Li Na. And this year in the top ten, we have ten different nations represented. Ten national heroes. So, on a week-to-week basis, we have more fans from around the world wanting to watch their home heroes.
QUEST: But did you accept that there's always been female tennis players, female tennis tournaments? Why now is women's tennis becoming so much more popular?
ALLASTER: Well, I think it's the athletes themselves. They are truly the very, very best in the world. And there's this duality of their incredible on-court performance and their off-court personalities and lifestyle.
If you look at Maria Sharapova and the multiple brands that she's involved in, with Cole Haan and TAG Heuer, she's an icon outside of just sport.
QUEST: And if we look at particularly Li Na with China --
ALLASTER: Yes.
QUEST: -- which I know is a priority for yourselves. The China Open, of course, is now mandatory, isn't it?
ALLASTER: It is a mandatory.
QUEST: In the WTA. So, you're basically saying -- I mean, you will go there.
ALLASTER: We have four times a year outside the Slams that we say to the athletes, we need you to play these events on the biggest stage with equal prize money and the highest ranking points, and Asia -- I know there's your bell.
(QUEST RINGS BELL)
(LAUGHTER)
QUEST: I didn't mention it for the first time, you mentioned it. You got it -- OK, carry on.
ALLASTER: So, in China, it's such a key market for us. We put one of those mandatory events in the fall, put an office there in 2008, have a team on the ground that every day is promoting Li Na and all of our stars, and the China Open also is just doing a great job year-round promoting women's tennis.
QUEST: So, we look at the BRICs, obviously. And then we look at the Gulf and the Middle East --
ALLASTER: Yes.
QUEST: -- and all these growth areas at a time when everywhere -- women's tennis is maturing in the developed countries.
ALLASTER: Correct. There's no doubt about it.
QUEST: And it is the Gulf and it is these other places where you can make the growth area.
ALLASTER: No question. So, we've got a great foundation in the mature markets, but we've had great success in the Middle East, particularly in Doha and Dubai, more than ten years. And I'm going to use it for the second time tonight, it's been the Dubai tournament that has given women equal prize money at their tournament.
(QUEST RINGS BELL)
(LAUGHTER)
QUEST: It's exhausting tonight!
ALLASTER: Leading the way. And they helped us not only with staging an event in the Middle East --
QUEST: Right.
ALLASTER: -- they also became a sponsor. They said, if we're really going to help grow tennis in the Middle East and around the world, we're going to do it year-round.
QUEST: All right, stop patting everyone on the back and start --
ALLASTER: Oh --
QUEST: -- and start telling me what needs to now happen to take it to the next level.
ALLASTER: Well, I think we really need to maximize the opportunity in China. I think Li Na's success came far earlier in our plan than we ever could have imagined, so that is a key.
And we're only putting our finger in Brazil and India. So, if we really want to penetrate those key emerging markets, we really need a stronghold, some great events.
QUEST: Wonderful. Have a good Wimbledon.
ALLASTER: Thank you very much.
QUEST: I just hope and pray for you, as we'll find out later in the program, that the weather -- it's looking shocking.
ALLASTER: It is shocking, yes. But hopefully, the weather gods will cooperate. We'll get to use the roof, though.
QUEST: Many thanks, indeed, for joining us. Lovely to see you, as always.
Coming up in a moment, doing business with a social conscience. Business leaders talk ethics, environment, and moral duty. Live with chief executive Jeff Joerres of Manpower after the break. QUEST MEANS BUSINESS, good evening to you.
(COMMERCIAL BREAK)
QUEST: Hello, I'm Richard Quest more QUEST MEANS BUSINESS in just a moment. This is CNN, and on this network, the news always comes first.
There's an emergency security meeting happening now in Turkey because of a missing Turkish fighter jet. The F-4 fighter jet reportedly went down near the Syrian border earlier today. Reports have suggested the jet's pilots were alive. The prime minister of Turkey, Recep Tayyip Erdogan, now says he has no information about the pilots' welfare and that the search and rescue operation is underway.
(Inaudible) official Egyptian news agency Al Ahram is reporting that Ahmed Shafiq will be named Egypt's new president on Sunday. But Egypt's military rulers haven't officially confirmed this. Thousands of protesters have packed Tahrir Square in defiance of the military, who say they'll face all challenges with an iron fist.
Jurors in Philadelphia have reached a mixed verdict in the trial of Monsignor William Lynn, the highest ranking cleric accused of helping to cover up sexual abuse cases. Lynn has been convicted on one count of endangering the welfare of a child and found not guilty of conspiracy and not guilty of another endangering charge.
Andres Breivik's lawyers say his client should be declared sane. Breivik confessed to carrying a massacre in Norway last July that killed 77 people. His defense lawyer wants him acquitted, saying his client committed the massacre on the grounds of political necessity. Prosecutors say Breivik is insane and should be held in a secure psychiatric unit.
The leaders of France, Germany, Spain and Italy have met in Rome to discuss he Eurozone financial crisis ahead of a wider E.U. summit next week. The leaders agreed that about $160 billion should be mobilized to stimulate economic growth and say they're in favor of a financial transaction tax.
(MUSIC PLAYING)
QUEST: At a B-20 summit in Mexico this week, business leaders talked about being ethical and the risks of their not. The head of Manpower Group, Jeff Joerres is the co-chair of the B-20 and he says more people seeking jobs, especially the under-25s want to make sure a company's ethical before they sign up. Now Mr. Haas joins us now from Milwaukee.
Jeff, if we look at the question of ethics, balancing -- ethics is always, you know, one of those things everybody says is marvelous and we must all do. And then when you try to put it into practice and particular in difficult economic times -- and I'm not talking about stealing; I'm just talking about other practices -- it become more difficult to do.
JEFF JOERRES, CHAIRMAN AND CEO, MANPOWER GROUP: I'm not sure if it's quite like that. I mean, clearly I understand what you're saying. But at the end of the day, ethics are ethics. And what we're seeing in organizations is that ethics has to cost you in enforcing; ethics has to cost you money. It's making decisions of where you're going to make profit and where you're not going to make profit.
And, clearly, the notion of sustainability and how you're attracting employees and what is your brand is becoming, very, very real and ethics is part of it. Sustainability is part of it. It was talked a lot about at the B-20 and communicated also at the G-20 meeting.
QUEST: So, if you take the sustainability question, what is it that companies now put as the priority for sustainable development?
JOERRES: Well, what it comes down to -- and of course, the term has evolved over time. And depending on industries, if you're an oil company, sustainability might be very, you know, centered to how you can go at it. But what we're seeing is creating programs that actually are giving back but also how they mix within your business, if you will.
So in our business alone, we put people to work. So all of our programs are how do we take disadvantaged, unadvantaged and underemployed, get them gainfully employed at a higher level and a little bit more living wages.
So that's our program. We do it all over the world, tens of thousands of people. It makes our engagement of our people much stronger, our brand much stronger, gives back to the community and it's sustainable from a profitability perspective.
QUEST: Right. But -- and if you talk about ethics, and you know, I mean, sustainability is one thing and you can -- and you're right to say individual industries can extrapolate what it means for them. But what does ethics mean to you?
JOERRES: Ethics becomes actually much more straightforward. I mean, you know, what are you doing with your chart of accounts? What are you doing with your revenue, your profitability? Are you actually engaging in practices, whether they be, you know, in areas where corruption is more, you know, well accepted, almost? Are you engaged in practices where you have human slavery?
Yesterday was Human Refugee Day. Those are areas where you've got to draw lines and say, no, I'm not doing business there and more and more companies realize that, you know what, on the margin, I shouldn't be doing that.
QUEST: OK.
JOERRES: There's still, of course, that balance, but I say it's clean.
QUEST: Right. Now, you know, of course, that here at CNN, we've taken a strong interest in the Freedom Project, in particular, on things -- issues like human slavery and human trafficking. It -- one thing has become clear from our coverage of that -- and I'm not going to mention any specific companies.
But whatever the ethical question is, it's the paying -- it's the paying of the lip service that is never followed through in practice that, I think, personally, having looked at this now for some time, is the most egregious. CEOs talk the talk but the companies don't walk the walk.
JOERRES: And it's got to change. The freedom row (ph) that we sponsored, there is a tremendous amount of global 2000 companies who are, through their supply chain, are not looking at organizations in their supply chain who are using some form of forced labor or labor that is informal market labor, that is creating some savings of money but is absolutely black and white, you shouldn't be doing it. And I think we have to be more accountable to that as companies.
QUEST: Finally, do you think the G-20 is worth the paper it's written on? I mean, I understand that we've got the G-8 and the IMF and -- but you look at the G-20 and you think, guys, ladies, stay at home, save the airfare.
JOERRES: Well, you know, it's difficult for me to answer, because I was on the B-20 side and definitely presented to the G-20. I can tell you the B-20 and what we did in our task forces was real work over a year's period of time that has accountability, that's putting in numbers. And we presented that to the G-20.
Now, clearly, there's politics involved in every conversation and there's priorities all over the world that are very different. But at the end of the day, we as businesses are making ourselves more accountable and we're trying to bring in the G-20 to say we have to work together with governments, not separately, in order to change this landscape of this high unemployment, particularly youth unemployment.
QUEST: Jeff, good to talk to you as always, particularly on these bigger issues. It's so nice to be able to talk about the big issues of the future and things like (inaudible) sustainability with you. I appreciate you giving me time today and have a good weekend.
I'll have a "Profitable Moment" and more after the break. (Inaudible).
(MUSIC PLAYING)
(COMMERCIAL BREAK)
(BEGIN VIDEO CLIP)
QUEST (voice-over): The answer to tonight "Currency Conundrum," the question, why were 1 koruna stamps stuck on 100 kronen notes? From Austria, Hungary, after World War II? The answer, C, stamps were stuck on the notes until new notes could be printed for the newly formed Republic of Czechoslovakia. But you knew that, didn't you?
(END VIDEO CLIP)
QUEST: Well, I'm sure Jenny Harrison probably knew at the World Weather Center for us this evening. Good evening, Jen.
JENNY HARRISON, CNN METEOROLOGIST: Hey, Richard, I knew because I read ahead. But, yes, of course.
No, I like -- you know I like your "Currency Conundrums." And now weather not much of a conundrum here, I have to tell you. You know, what it's going to do? More rain (inaudible) --
(CROSSTALK)
HARRISON: It's a Friday. More rain heading in to the northwest. But the severe storms of 24 hours ago, they have really abated. The system now moving up towards the north, the air not quite so unstable there, but you can see, still more rain across northern sections of the U.K. And it is pretty relentless.
So we could be seeing some localized flooding, but as I say, the strong storms, they'll be pushing up towards the north, easing off, and then we've still got that very hot, dry weather in the far southeast. The wind's quite brisk over the next 48 hours, mostly across the northwest again.
And then some warnings in place through Saturday morning, mostly really for some possibly heavy rainfall at times. And we could have some of that large hail as I remember yesterday, 5.5 centimeters was the largest reported.
Now temperatures, they're still up there, Bucharest 36 degrees, 9 degrees above average, just clinging on really, this heat through the first part of the weekend. But it should begin to ease off. Here's what you do, of course, if you can, my goodness, that looks nice, doesn't it? Just go stand under a lovely cool, refreshing waterfall. That'll certainly help with the heat.
Meanwhile, to the north of Europe, I'm afraid no worries there. We've got average temperatures, but look at the southwest, the heat beginning to push in there into southern areas of Spain. So Madrid, as we go through the weekend and then Sunday and Monday in particular, 37 degrees, so 10 degrees above average, feeling even warmer, of course, in the sunshine.
Look at the heat, too much of a problem right now for the football just about to kick off, well, a few minutes. Gdansk, 16 degrees Celsius. We've had a little bit of cloud in the last few hours, one or two showers as well. But it should stay clear for the game and we've also got more of that rain, of course, pushing eastwards as well.
So in a few minutes, it'll be mostly cloudy, temperatures between about 15 and 18 degrees and then for Saturday, Spain, again France, we should have temperatures in the low to mid-20s, and again it should be a clear evening for that.
Now Saturday as well, this was actually Ladies' Day. There she is, The Queen, with the Duke of Edinburgh. So Ladies' Day, you know what that means. Oh, yes. It means get yourself a rather fancy hat. Look at that. You would not like -- you wouldn't want a strong breeze to come through in a hat like that. But that is quite amazing. There's some funny ones there.
But for Saturday, the Diamond Jubilee Stakes. Now the reason I mention that, black caviar, that is the race it is in, 3:45 pm local time there in London, mostly cloudy day, temperatures sort of on the cool side, but it should hopefully stay dry and of course six furlongs will be run at 3:45.
There's the rain, the next system coming in across southern regions of the U.K. And northern areas of mainland Europe, and your temperatures on Saturday, 14 in Stockholm, a bit warmer in the -- in Madrid, Rome at 34 degrees, Richard.
QUEST: Thank you very much. All we needed was a tip for the top. Many thanks.
Tonight's "Profitable Moment," all for one and one for all, the big four of the Eurozone say they will provide a plan for 130 billion of growth. Forgive me if I don't get too excited. It's the latest attempt by the countries to show somehow to get the confidence of the markets. And forgive me if I don't get too excited until we see the detail and decide if it's realistic or another attempt to fudge existing money.
In fact, I just wonder how many times the European leaders have to see their efforts evaporate as the markets give their thumbs down. The raw (ph) problem is the countries and the plans have lost credibility, only action counts and tomorrow the euro pacification won't be good for the markets today.
And that's QUEST MEANS BUSINESS for tonight. I'm Richard Quest. whatever you're up to in the hours ahead, I hope it's profitable.
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ROBYN CURNOW, CNN HOST: This is Johannesburg, I'm Robyn Curnow and you're watching MARKETPLACE AFRICA. Well, compared to some African cities, London, Paris or New York, and the continent residential real estate might not be as glamorous or as expensive.
But a new report suggests that might be changing, at least in some parts of Kenya. David McKenzie now explains how Kenya's property values might be some of the best in the world.
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DAVID MCKENZIE, CNN CORRESPONDENT (voice-over): At the final stage of a house, it's all about the finishing touches. And this 14-mansion development in Nairobi is almost done. It's called Miotoni Ridge. It might as well be Millionaires' Mile.
MCKENZIE: These houses are designed for the very highest end of the luxury market, with all the mud cons (ph), five unsweeped (ph) bathrooms, hardwood floors, venetian finishes and a fully fitted Italian kitchen. These properties are running for more than $1 million U.S. and it might surprise you that they're already 50 percent sold out.
MCKENZIE (voice-over): In fact, in recent study by city private bank and Knight Frank , Nairobi was rated the best performing prime residential market globally. That didn't surprise Knight Frank's managing director in Kenya, but it did surprise their research department.
BEN WOODHAMS, MANAGING DIRECTOR, KNIGHT FRANK KENYA: We were higher than Miami, and it was like, how dare you, you know? So we had to sort of justify our figures and said, yes, this really is what's happening here.
But it's about growth. It's not about value. So it's about, you know, Nairobi has grown 25 percent in terms of its residential market over the year before. So it's a level of growth in Nairobi, and it's similar at the coast as well.
MCKENZIE: But it's not just presumably that you're coming off a low base, you know. It's also about certain fact that they're making investment attractive here. What are those factors?
WOODHAMS: Well, I think regionally Kenya certainly is a safe haven. I think that people are seeing relatively good returns in Kenya, specifically, but in Africa as a whole, particularly with the problems that we're seeing in the rest of the world.
A lot of Kenyans living in the diaspora in the States, in Europe, send a lot of money back to Kenya. And a lot of that gets invested in the property market. So that's another big driver for us.
MCKENZIE (voice-over): Woodhams says it's mostly Kenyan, or Kenyan- linked investors that are driving the prime market to number one.
And number two in the index wasn't London, Vancouver or Hong Kong.
MCKENZIE: Number two was the coast, where local and international investors are flocking in to get a unique combination of sun and culture.
MCKENZIE (voice-over): Mombasa, Malindi and Lamu on the Indian Ocean saw 20 percent growth in the luxury market. Lamu, a tiny island off Kenya's north coast, is the second home to princes and tycoons.
ANDREW MCGHIE, LAMU ISLAND PROPERTY: Here's the house we're renovating and a better house just up here. And this is the (inaudible) --
MCKENZIE (voice-over): And Andrew McGhie says he's the only real estate agent based here. He's renovating a 19th century Swahili mansion.
MCGHIE: There's all the very intricate renovation that one does on the decorative plaster work and the painting of the beams. Certainly people come here and are entranced by it and make their decision. But it sells itself.
MCKENZIE (voice-over): McGhie believes that Kenya's coast tugs at people's heartstrings, not just their wallets.
MCKENZIE: So the fact that it's unique is actually a selling point, because sometimes people don't want something that's all that different for such a big investment?
MCGHIE: Yes, I think Lamu attracts a fairly adventurous, romantic sort of person, who wants to come somewhere that's completely different to their everyday lives, probably, and while the old town has changed a little bit in the last five years, it hasn't change very much in the last 500 years.
MCKENZIE (voice-over): But things have changed. Somalia is just up the coast, and recently its lawlessness spilled over the border. Kidnapping in the area prompted several countries to put out travel warnings.
Kenyan forces have occupied southern Somalia and beefed up security on the coast. The warnings were lifted, but the chilling effect remains. On the whole, international investors have been slow to dive into the market.
JAMES MURATHA, REGIONAL DIRECTOR, STANBIC INVESTMENTS: International investors are key on getting into countries where they know that their property rates are protected, where the rule of law is respected and where there is the perception that the justice system is not -- is not up to par, then they prefer to -- now to stay away. And that's where you see more local investors actually investing in these markets as opposed to international investors.
MCKENZIE (voice-over): Analysts say that uncertainty about upcoming elections and high interest rates may slow growth, but agents believe it will only be temporary.
MCKENZIE: Individual and institutional investors, why would they want to come to Kenya now?
UNIDENTIFIED MALE: Yes, I think, as I said, it's about returns and we're not just talking about the director relationship between the rent and capital value. We're talking about, you know, year-on-year growth as well, and I think that's the key. The levels of growth that we've seen in Kenya have made returns for corporate institutional investors very good indeed.
MCKENZIE (voice-over): Ultimately, they hope the deals will be just too good to miss -- David McKenzie, CNN, Nairobi.
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ROBYN CURNOW, CNN HOST: Well, that was a look at the possible property market boom in Kenya. Now another area of growth in Africa is the role of private equity firms. (Inaudible) invest into companies. Well, after the break, we speak to a Harvard graduate, who left his finance job in the U.S. to set up his own investment firm in Senegal.
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CURNOW: Now behind most major business deals, there's often a private equity fund manager lurking. They tend to keep a low profile, but they are key financial players. Well, for this week's "Face Time" interview, I sit down with the CEO of an investment fund that's operating across Africa.
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CURNOW: So someone's described you as the money man.
PAPA NDIAYE, CHIEF EXECUTIVE, AFIG: We continue to believe that what we bring to the companies we invest in is much more than money.
Money is becoming more of a commodity. We like to invest in local entrepreneurs that require you basically come in alongside your money to really help them with governance, help them with transparency, help them also with taking themselves to the next level in terms of operational efficiency, human resources and so on and so forth.
CURNOW: You're managing around $70 million.
NDIAYE: Seventy-two, yes.
CURNOW: Seventy-two, the two is extra -- it's important for this?
NDIAYE: Well, everybody who's given us $1 is very important to us.
CURNOW: You said you've worked for the, you know, the bigger players. For you, importance to go into very specific niche within Africa at this specific time.
NDIAYE: Well, we saw a gap. So we said let's try and put together a fund that will address that. I feel that, in my job, most of my friends who are doing private equity around the world are vilified. They are these money-hungry, you know, people and so on and so forth. But we in Africa can actually today claim to be doing private equity with a strong developmental angle.
CURNOW: So you're working for Morocco down to Angola. You're basically going to a certain type of business man, (inaudible) I'm going to invest in your company. What are looking for, and who specifically is making a difference, is doing something?
NDIAYE: Well, first, we're looking for guys who have already proved something, who've done well and so on. So that's the minimum. On top of that, we need people who have a transformative mindset.
CURNOW: What do you mean by that?
NDIAYE: By that, people who are saying, look, I'm no longer willing to kind of operate in a status quo, mom-and-pop shop. I want to be a regional player. Also, take some painful decisions in terms of delaying their gratification.
If you build a company over four, five, six, 10 years and all of a sudden you want to go to the next level, some people don't have the stomach for it, because they want to enjoy, so to speak, their success.
And when we come in, we basically work with them to make those sacrifices, take themselves to the next level, because it requires a lot of investment, a lot of time and a lot of stress, unfortunately. But the rewards are tremendous.
CURNOW: You, your partner, a lot of people, particularly your age, your generation, studied overseas -- Harvard -- coming back. How important is this diaspora, the returnees?
NDIAYE: I think it's critical. I think Africa needs all of its forces. I would not want to portray it as we are kind of prodigal sons, returning, so to speak. I don't believe in that image at all. I think there are brilliant people locally that have been doing fantastic. But you've got to come in and mesh.
And I think many of us that are returning do well because we have stayed in touch. We don't do well because we have just been parachuted after all the various degrees and Wall Street and whatnot. It's because you stayed in touch, you showed an interest and today you can leverage that with whatever you've learned outside. I think that that's critical for Africa to have that mix of skills and backgrounds.
CURNOW: And how critical is it now? People like you being the bridge, literally, between the investment coming in and the seeds that are growing?
NDIAYE: I think it's incredibly critical. I think it's critical for Africa to really have the best minds from the most diverse perspectives, because what's going on in Africa, politically, socially, economically, is so radical compared to maybe even what is being put out in the press, is to positively radical.
You need people from different perspectives to come in and kind of say, look, this is what I -- this is my -- this is what I'm willing to pitch in in this debate. And I think from the economic standpoint, you basically need guys who have best practice from abroad that can basically do some type of technological transfer locally with people who have local knowledge, who can teach you that local knowledge. So we learn every day as we try to also contribute.
CURNOW: You were saying to me before the cameras turned on, that you think that particular role of the private sector is really underplayed, in a sense.
NDIAYE: Yes, I think the private sector, I believe, continues to be a little bit of a gadget name, you know, people like to say the private sector this, the private sector that. But I don't think they're really kind of -- particularly from a government standpoint, I think some of the smartest governments in Africa right now are those who are beginning to say, forget the titles. Let's actually go into the doing.
So if you say you believe in the private sector, it shouldn't be just a speech. It should actually be a change in the regulatory framework. It should be government being a supporter of growth and job creation rather than rules and paranoia about what the private sector might do and take over and be this great evil. So I think once the governments who actually get that are the ones who are doing a fantastic job right now and are the ones that we have a lot of hope to sort of lead the continent going forward.
CURNOW: Reminder, you can find us online at CNN.com/MarketplaceAfrica. But for me, Robyn Curnow here in a rather windy Johannesburg, see you again next week.
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