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Quest Means Business

German Foreign Minister Calls for EU Talks; UK Triple Dip Risk; Europe's Recovery; Stocks Up in Europe; Edelman CEO at Davos 2013; Italian Bank Scandal; EU Transaction Tax; Banking Sector Standards; Fitch Downgrades Cypress; Euro Rising; Ingredients for Growth

Aired January 25, 2013 - 14:00   ET

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

RICHARD QUEST, HOST: We're all for change. Tonight, the German foreign minister in an international exclusive tells Britain, but not this way.

Talking of Britain, the shrinking economy. The economy contracts.

And tonight, the European Commissioner Michel Barnier says when it comes to banking, it's all about morality.

I'm Richard Quest. It is freezing in Davos tonight, but don't worry, I mean business.

Good evening. Germany's foreign minster says the main risk for Europe is believing that there is no risk. Guido Westerwelle says European states must stick together to survive.

And of course, when it comes to Britain's call for a referendum and a renegotiation, although the German government isn't in favor of fully reopening the treaties, they do agree that there needs to be a discussion on the relationship between the countries and Brussels. And in the end, Brussels mustn't have all the power.

(BEGIN VIDEOTAPE)

GUIDO WESTERWELLE, GERMAN FOREIGN MINISTER: There are some tendencies in the last years where the commission tries to increase their own power and influence into areas where they're not responsible for.

For example, the latest initiative by Brussels is a quota for the private companies -- agenda quota for the private companies all over Europe. This is not the business of Brussels. This is something that we can solve at home in our own countries.

QUEST: Are you saying to Brussels, "Enough, we're going to have a discussion about what's your job and what's ours"?

WESTERWELLE: My point is that -- don't make a mistake about one thing. After a decade of a partnership, to tell your partner in a crisis, you change or I'll leave you, does not work in private life, and it does not work between countries and in the European Union.

QUEST: Let us talk about the economy. The worst is over, so says most people. The euro is safe. Is that your gut feeling?

WESTERWELLE: I think -- we are not back, but I hope with a bit fortune, like the French say, I think -- the worst is over.

QUEST: Everybody is saying -- Chancellor Merkel talked about it here -- the biggest risk is everybody starts, "Well, it's all over. Let's not worry about it."

WESTERWELLE: This is really a bigger -- the biggest risk, that we think that there is more success in some countries in the European Union, the figures are getting better, the statistics are getting better. And then we think that what we thought what is necessary as our homework is not necessary ay longer, and I think this would be the wrong conclusion.

I just came back from Spain and Lisbon this morning, and I have to say, it is so positive to see the latest news from -- for example, from Portugal and from Ireland and others, and we shouldn't risk this success by going back to deficit spending and ignoring fiscal disciple once again.

And this is my most important issue, that Germany does not only ask for fiscal discipline -- we know that solidarity is necessary in a community -- but growth, growth, growth.

(END VIDEOTAPE)

QUEST: Germany may be asking for growth, growth, growth, but from another leading European economy, it was quite the reverse. The UK may be in the brink of an unprecedented triple dip recession. GDP shrank 0.3 percent in the last quarter of 2012, according to official estimates.

Now, that's bad enough, but it's three times as much as economists had expected. Look at that graph on the table. You can see the Great Recession on the left. Then you have growth. Then you have the double dip recession. One quarter of growth over the Olympics, and again heading towards a recession again.

The International Monetary Fund this week urged the UK to turn down its growth-hitting austerity plan, calling for the government to move to Plan B. The finance minister, George Osborne, says no, he's sticking with Plan A.

(BEGIN VIDEO CLIP)

GEORGE OSBORNE, UK FINANCE MINISTER: Of course the world has problems. Britain has problems built up over many years. But as I say, you can either run away from those problems, you can either believe that yet more spending, yet more borrowing, yet more debt, all the things that got us into this mess are going to get us out of this mess.

Or you can actually confront the real issues Britain faces, which is it needs to be a more competitive place, it needs to win that global race, it needs to create the jobs for the people of today and the children of tomorrow --

QUEST: Right, so --

OSBORNE: -- so that they actually do have prosperous careers in the future.

(END VIDEO CIP)

QUEST: We've been getting reaction here in Davos to the UK figures. The chief executive of WPP, the largest group, Sir Martin Sorrell, spoke to Ali Velshi, and Sorrell says looking beyond the quarter-to-quarter changes, well, taken overall, the UK economy has stabilized.

(BEGIN VIDEO CLIP)

MARTIN SORRELL, CEO, WPP: We think that the UK economy is bottoming out. We refer to it as a corrugated bottom. So, your minus 0.3 is a corrugation --

ALI VELSHI, CNN CHIEF BUSINESS CORRESPONDENT: Right.

SORRELL: -- and I think it is flattening out. I think the government are doing the right thing. The focus on the debt or reducing the deficit, which is something we'll anxiously await the Americans dealing with, is not kicking the can down the road. We think it's the important short-term priority.

The longer-term priority, the plan, the overall plan, if you're asking people to make sacrifices, you have to try and raise their eyes to the horizon. That's in place, too. A bit fragmented, but in place, so things like infrastructure, education, technology, immigration policy, taxation policy, I think are all coming together.

(END VIDEO CLIP)

QUEST: That of course is Sir Martin Sorrell. Continuing our digest of economics in Europe tonight, the president of the European Central Bank, Mario Draghi, says last year was the year the euro was, in his words, "relaunched" and states deserve credit for their reforms.

(BEGIN VIDEO CLIP)

MARIO DRAGHI, PRESIDENT, EUROPEAN CENTRAL BANK: The perception we have at the ECB is that the level of economic activity is in the process of stabilizing at very low levels, and we foresee a recovery in the second part of the year.

(END VIDEO CLIP)

QUEST: That's Mario Draghi, and his forecast had a positive effect on the market. Investors in Frankfurt and Paris started buying, manufacturing stock led the way. Look at that, the best gains of the day were in Frankfurt. The Xetra DAX is up 1.5 percent, give or take. Zurich was flat, literally, barely -- barely budged.

Richard Edelman is the president and chief executive of the world's largest public relations firm, Edelman. Richard joins me now. Good to see you, as always.

RICHARD EDELMAN, CEO, EDELMAN: Hey, pal.

QUEST: It's cold.

EDELMAN: It's a bit cold.

QUEST: It's colder than it has been.

EDELMAN: I grew up in Chicago, I'm used to it.

QUEST: Now, as we look at what's been happening here in Davos, we know the issue's been growth, we know the issue's been jobs. You hear the UK is now going backwards. Your German foreign minister says it's all about staying the course. What are CEOs telling you?

EDLEMAN: CEOs are actually feeling that this Davos is a lot better than last year. They're feeling like there's no great crisis. They actually see good growth in the United States, they think that China has good potential the second half of the year, they're seeing great opportunities in Africa. But Richard, there's a big problem with government. They're still nervous about government.

QUEST: What? This comes to your trust barometer that you have every year, isn't it?

EDELMAN: Yes.

QUEST: Your trust barometer says what?

EDELMAN: Basically, that the gap between trust in business and government continues to grow, that there's also terribly low trust in leaders. That the leaders are not telling the truth. They just don't see leaders being honest with them.

QUEST: But is that because leaders -- are perceived to be disingenuous and -- let's call a spade a shovel -- they're perceived to be liars? Or is it because they -- people still feel they're hurting?

EDELMAN: I think that leaders are sort of lacking, because they're very tactical. They're making short-term decisions, and it's really hurting the governance.

QUEST: If you take, for example, the UK and the David Cameron decision, and you take the German foreign minister's comments this evening, and you factor it all in, where do we go from here?

EDELMAN: Basically, business has to go on its own. My view is that business has to say, we're going to take lead here. We're going to be much more transparent, we're actually going to try and have good returns for shareholders and be actually good for society. And that -- Paul Polman of Unilever, people like this -- are absolutely taking the bull by the horns.

QUEST: Has this Davos, because it's not had a crisis -- Davos often works best when it does have a crisis -- has this one been a particularly good one, do you think? I've seen people walking around wondering what they're talking about.

EDELMAN: Look. Ultimately, we have to come back to some normality, right? Normalcy. And ultimately, you want business to go forward and not look over their shoulder all the time at government.

QUEST: Your business is global, correct?

EDELMAN: Right.

QUEST: A few countries. Come over here.

EDELMAN: All right. I'm ready.

QUEST: This is the riskometer.

EDELMAN: Oh.

QUEST: If you take the risk of 2013 global economic growth, are you more worried about the US, with its budget deficit problems and its budgetary dysfunctionality, or the EU and the continuing eurozone? Or you can go on a frolic of your own. Where would you put your cross?

EDELMAN: I actually think the US is going to have a very strong year. I think that Europe is going to have a bumpy year, so I would be sort of here in making Europe the much more risky place.

QUEST: There you are. We'll give you a sock around you as well. Good to see you, as always. Thank you very much for coming in.

EDELMAN: I appreciate it. See it.

QUEST: QUEST MEANS BUSINESS, we are live in Davos. By the way, @RichardQuest if you've got a thought of where you would like to be on our riskometer. Do feel free to join in our debate on that, @RichardQuest, hash tag #Quest.

When we come back, transaction taxes and trouble at the top in Italy. It's QUEST MEANS BUSINESS, good evening.

(COMMERCIAL BREAK)

QUEST: Welcome back, QUEST MEANS BUSINESS, live to you tonight from the World Economic Forum in Davos.

The Bank of Italy, the central bank, is under fire for failing to stop trades that pushed the country's oldest bank towards a government bailout. Monte dei Paschi took huge losses on derivative trades before 2009. The central bank said it missed them all.

Its governor at the time was Mario Draghi, now of course president of the ECB. I asked his successor in Rome, Ignazio Visco, if he thought there were irregularities at Monte dei Paschi.

(BEGIN VIDEOTAPE)

IGNAZIO VISCO, GOVERNOR, BANK OF ITALY: Oh, yes. There is. There are irregularities, for sure. And these have to be ascertained and followed and sanctioned. But this does not apply that there is a consequence for the stability of the bank.

QUEST: Was the -- did the Bank of Italy in its earlier regime, did it perform its job well? Is the -- are there questions that need to be asked about the central bank's role in this?

VISCO: Yes. I think that the -- we are obviously reconstructing the whole thing, and we will be very open and there is no question that the accountability will be fully respected. But I have to say that this information only came to the fore in the last month.

It was an information about the connection of two different operations. And had we known that they were connected, that would have been clearly an issue for the bank, for the central bank.

(END VIDEOTAPE)

QUEST: That's the governor of the central bank of Italy. The EU's top banking official says the capitalist system has gone off the rails. Michel Barnier is Europe's commissioner for internal markets and services, and I asked him about Europe's new financial transaction tax, which the commissioner freely admits is not exactly ideal.

(BEGIN VIDEOTAPE)

MICHEL BARNIER, EUROPEAN COMMISSIONER, INTERNAL MARKET AND SERVICES (through translator): I would prefer it, of course, if this tax were a worldwide tax. The financial crisis was a world crisis, it had broke the back of growth, and after all, we helped out the financial sector, it's perfectly right and fair that they should give something back. I would prefer it if the UK and even the US were onboard.

QUEST: And the fact that it is not a worldwide tax, and the fact that it is going to be so limited in region, is its biggest, weakest point?

BARNIER (through translator): Yes, but this tax is one with a low rate and a very broad base, and economically, I think it's perfectly bearable. After all, it is something which can be applied fairly easily in technical terms.

Politically and morally, I think it's only right. After all, the financial sector, the banking sector, are part of society, not outside society.

QUEST: Do you now believe, Commissioner, that we have got to the bottom of the bad deeds of the banking sector in the previous -- I was going to say "previous generation," but the -- that period of time when it seemed anything was -- went?

BARNIER (through translator): We have to be cautious. After all, look at the recent libor case. No one would have imagined four years ago that we would have discovered what we have discovered now.

So, it is only right and fair that rules applying to the financial sector should now be applied in order to bring about greater transparency, and more moral attitude, to improve the conduct that, after all, caused so much damage over 15 years.

All these rules, which have been called for by the G20, still have to be put in place. They're not all yet effective, and they have to be.

QUEST: You've used the word "moral." Is that what is lacking, do you think, in the banking sector, in the financial world? An industry that is driven by money, motivated by profit, and needs to reestablish ethics and morality?

BARNIER (through translator): I know many bankers and heads of enterprises who do their work and make profits and trade perfectly honestly. What I have found, and what I would like to address, what I challenge is all the sorts of manipulations and toxic products and excessive bonuses, which can hardly be justified, that we've come upon over the last few years.

We've seen the liberal system, the capitalist system, go off the rails and become a caricature of itself. We've got to bring it back on track and ensure that financial services, the financial sector, work for the economy and for our regions.

Liberalism and trade can certainly justify the work towards profit while at the same time respecting a moral code, an ethical code.

(END VIDEOTAP)

QUEST: That's the European commissioner for the single market. Michel Barnier with some strong words. And as if to wrap the discussion up, Fitch ratings agency tonight downgrading Cypress a couple of notches, a notch or two, and again warning that the outlook for Cypress is negative. A further reminder that if things are looking better, certainly many countries are by no means out of the woods yet.

And so to a Swiss-based Currency Conundrum. The current Swiss franc bank notes features the pictures of prominent Swiss citizens. There they are. You've got to look closely sometimes. What special security features do these portraits have? Is it a security thread, is it a microtext, or is it a hologram? We'll have the answer for you later in the program.

These are the currencies tonight. The euro is rising. The single currency is at an 11-month high against the dollar, boosted by better than expected bank payments. These are the rates, now for the break.

(COMMERCIAL BREAK)

QUEST: That's Jeff, the Global Economic Forum snowman. Welcome back, QUEST MEANS BUSINESS, we're live in Davos.

Europe must first gather the ingredients of growth before it can make output rise. That's the view of the chief exec of Societe Generale. I spoke to him earlier in Davos, and I asked him, in many ways, the most difficult part of the crisis is now ahead of us.

(BEGIN VIDEOTAPE)

FREDERIC OUDEA, CEO, SOCIETE GENERALE: The challenge is growth, in particular, in Europe. We know we need reforms, more competitiveness, that the ingredients of growth going forward we need to come from investments and competitiveness. So, we have to do the reforms. And as you said, it's difficult to expect a miracle, which could mean jobs and unemployment to go down.

I think what's important is not to lose time. So, when I look at the next three years, 2013 will be a year of transition. What is very important is that we take advantage of 2014 and 2015.

QUEST: So, what would you like to see happen, what steps, what transformation, what reforms --

OUDEA: Yes, yes.

QUEST: -- in your view is the core of this.

OUDEA: Yes, yes. First of all, resist any temptation of fragmentation in the world. There is a trend to -- in terms of regulation, sometimes monetary policy, towards fragmentation. Fragmentation is not good for the world.

If I now focus more directly on Europe and the eurozone, we see each country addressing its issues. I think it might not be enough, and what I would like to see in 2014, 2015, is significant steps forwards towards more integration and more coordination in Europe, to add -- to boost the growth in Europe.

QUEST: Which his exactly, in many ways, the opposite of what David Cameron has been talking about with his referendum and wanting to send more powers back to the countries.

OUDEA: I agree that's again, today, the temptation to do that, and the public opinions might not have been prepared for that kind of steps. But I think that the business community shares the view that we need, again, more integration.

What does that mean? In policies like energy, more coordination.

QUEST: In this environment, the financial sector is still not only in some cases week, but in other cases, there is a huge lack of trust from the people to banks and to the financial industry. Now, obviously, your firm has had its own woes and difficulties. What needs to be done, and how far are you all from doing it?

OUDEA: You know what happened, and to a certain extent, banks have been considered as the only institutions accountable for the crisis. There's still a need for more time, and clearly what I would like to say is -- to stress is the amount of changes which already took place in the last five years, and changes will further take place.

I think that the best thing we can do as a European bank is to finance the economy, to support our clients, in particular, in the spirit of time where things might be more difficult. And that's what we are doing in France.

And so, I think if we stick to this policy progressively -- and we see that with our clients on the ground -- the confidence has improved since the last two years.

QUEST: The biggest threat to global growth in 2013 comes from where, sir? Put a cross where you would think.

OUDEA: I would still -- I would still think it's still slightly more the European Union. I think you know the US -- the US have the ingredients for growth. In Europe, what I think personally is that each country can grow, but you know that we have better growth, you need to put together all the efforts, all the initiatives, more coordinated policies into Europe.

(END VIDEOTAPE)

QUEST: And there we are, putting the mark from the CEO of Societe Generale, being faithful to where he wanted it to be, and as you can start to see now, the riskometer really filling up quite nicely. We'll talk about that later in the program.

Coming up after the break, joining me, the Canadian trade minister, live here in Davos. And when we all come back, managing risks: we could learn a few lessons from how they do it on the mountain. QUEST MEANS BUSINESS in Davos.

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RICHARD QUEST, CNN HOST: Hello, I'm Richard Quest. There is more QUEST MEANS BUSINESS in just a moment. This is CNN and, on this network, the news always comes first.

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QUEST (voice-over): On the second anniversary of the Egyptian revolution, Tahrir Square looks relatively peaceful. There have been clashes in Cairo and other cities throughout the day. State TV reports 99 people have been hurt in running skirmishes between protesters and the police.

Malian troops backed by the French military are pressing further into militant-held territory. A military source tells CNN that hardline Islamists have now been dislodged from the town of harumbori. It's just 250 kilometers from the Islamist stronghold of gaia.

North Korea is warning of what it says strong physical cmeass against South Korea, the latest threat in a series on North Korean state television follows the imposition of tougher sanctions earlier this week by the United Nations.

Batteries exploding into flames are, quote, "an unprecedented event and a serious safety concern." That's what the U.S. safety authorities are saying about such problems aboard the new Boeing Dreamliner. The U.S. National Transportation Safety Board displayed the charred remains of a battery that caught fire after a 787 landed in Boston earlier this month.

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QUEST: Among the deals being discussed and dissected here in davos, Canada is calling it the most key and ambitious trade expansn in history. A comprehensive trade deal with india and working towards a free trade agreement with the European Union.

Ed Fast, Canada's trade minister, he joins me now.

Good evening, Minister.

ED FAST, CANADIAN TRADE MINISTER: Good evening. Nice to be on your show.

QUEST: Bilateral deals all over the place, multilateralism is dead.

FAST: No, I wouldn't say multilateralism is dead --

QUEST: The Doha round is.

FAST: No, the Doha round is badly stalled, I would say. But on our side, what we're doing now is, of course, focusing on bilateral regional trade deals, plurilateral agreements. We're working very hard to open up new opportunities for Canadian businesses to business around the world.

QUEST: Pascal Lamy, standing where you were, said last night, for example, an E.U.-U.S. deal -- and I imagine an E.U.-Canada deal -- is fine bilaterally but he would prefer a multilateral deal at the WTO.

FAST: So would we in Canada. Our position has been very clear. We believe that WTO should remain the preeminent trading forum within which rules-based trading takes place.

QUEST: So why is it such a fiasco?

FAST: Well, I -- a lot of us are having difficulty trying to come up with an answr to that. I think we have a lot of divergent interests. We have rapidly changing international environment. And so in Canada, we're very much focusing on doing what we can bilaterally and of course, plurilatly as well.

QUEST: There will be a new leader of the WTO. There are nine candidates. We get to see them all next week. And three are women; many of them developing countries. Do you subscribe to the view -- and I'm not asking you who you think it should be -- but it should come from a developing nation.

FAST: Well, right now, we're looking for the candidate who's best placed to be able to reinvig the Doha round. As you know -- as you know, many of the candidates are right here in davos. And I've had an opportunity to meet all of them --

QUEST: Do you have a preference here?

FAST: -- no, it's way too early in the process. What I want to do is find out what is their vision for the WTO? What is their vision for the Doha round? Are they able to bring together the diverse interests that are required to get the Doha round started again?

QUEST: Oh, please. The Doha round, kill it off. (Inaudible). Come over here to the risk-ometer.

Now if you take 2013, as global economic growth, what's the biggest risk? Is it the U.S. with its budgetary shenanigans or the E.U. still with its E.U. sovereign debt and risks?

FAST: You know, others have been asked that. I'm going to decline to share an opinion because I'm mostly focused on what I can do in Canada. And what I would say to those who are watching, Canada's a fantastic place to invest. Low corporate in business taxes. We've got a highly educated workforce. And of course, we have the safest banking system in the world (inaudible) World Economic Forum has been (ph). So come to Canada, look to Canada. It's a great place to invest.

QUEST: Thank you, Minister.

FAST: You're very welcome.

QUEST: Thank you very much indeed.

FAST: Thank you for having me.

QUEST: (Inaudible) down there, Doha round, dead and buried.

Samsung has reported a record quarter. Profits were up 76 percent in Q4. That's more than $6.5 billion solid smartphone and tablet sales were behind the (inaudible) shares finished almost 2.5 percent now in Seoul. That's because the company warned the furious growth spurt is likely to ease off in 2013.

The company overtook Apple as the world's largest smartphone seller, shipping 213 million devices worldwide in 2012.

Apple's been overtaken in another league table tonight. It's no longer the world's most valuable company. The Dow's hitting new highs. Alison Kosik's at the New York Stock Exchange for us this evening.

Alison, when we look at Apple, all right, down from 700, down to whatever it is at the moment. We shouldn't be surprised perhaps. The question for you is what people are saying there about where the risk is in the future.

ALISON KOSIK, CNN BUSINESS CORRESPONDENT: Well, the risk in the future is, first of all, where this stock price is going to go. I mean, you know, you think about those who bought in at a much higher price are really hurting today. You know, one of -- one analyst that I spoke with earlier, he told me that with Apple at this point, it's really all about perception. And it's really the perception that he believes is really pushing the stock as low as it is right now, because right now it's falling another 1 percent or so, down to $445. But yes, it lost that crown. But that could be momentary, that market capitalization. It could get it back again on any given day, Richard.

STOUT: Alison, it's Tim Geithner's last day at Treasury. He -- I mean, the market's now awaiting -- what's their view?

KOSIK: Well, I'd say that today is probably a very happy Friday for Tim Geithner. You know, there's no secret he's been wanting out of this job for a very long time. And he's leaving quite the legacy behind as head of the Treasury Department. You know, under his watch, we had the age of financial bailouts, bank stress tests and times of new Wall Street regulations. And cheerleaders say he's the guy who helped restore confidence to the financial system. Critics say he favored big banks over regular systems (ph).

At this point, Wall Street's, though, not feeling strongly one way or the other yet about Jack Lew taking his spot, Richard.

QUEST: Alison, the risk-ometer, I know you've been dying to have -- well, you've been dying to have your go at it, the risk-ometer. So I've seen from Wall Street, did they believe on the stock -- because I know you've been canvassing opinion -- more U.S. risk in 2013 to global growth? Or is it still with the E.U. and Eurozone?

KOSIK: It's really -- it's really the Eurozone. It's really Europe that -- the belief is it carries more of the risk, look at the debt problems. They're far from over. But look how the U.S. economy is doing. It is recovering still, albeit at a very slow pace. But you know, just for an example, the housing market here in the U.S. is gaining momentum, the very thing that got us into this lousy situation in the first place. Earnings for the 4th quarter are pretty strong. So, yes, I think the risk- ometer is going to go toward Europe, if you ask Wall Street.

QUEST: Alison Kosik at the New York Stock Exchange, we thank you for this. This is the way the risk-ometer looks. @RichardQuest is where we'll put your view. We'll take a collective view on the view of your viewers and of your thoughts. It is absolutely freezing in Davos. I do not know what's happened over the last 24 hours. But I can tell you, bits are now cold which sohuldn't be. QUEST MEANS BUSINESS. We're live from Davos.

(COMMERCIAL BREAK)

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(BEGIN VIDEO CLIP)

QUEST (voice-over): Time for the answer to the "Currency Conundrum," that is (inaudible). We asked you what special security features are the portrait of the Swiss bank -- the Swiss franc note? Have the answer is B. Microtext -- and not just any microtext. The latest Swiss francs feature portraits of prominent Swiss citizens. (Inaudible) powerful magnifying glass you can read a short biography of each person.

You cannot be serious. Well, I've got a strong magnifying glass, so I'll have to try and do it afterwards. But I'm told it is there.

There's a chill in the air at Davos. It is not only the subzero temperatures (inaudible) ground which we're trying to cultivate growth starting to look like the permafrost. This year's theme in davos was all about bouncing back. So as they try to denavigate it in the halls of the Congress Center, well, we can learn from lessons about navigating it on the mountain.

(BEGIN VIDEO CLIP)

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QUEST (voice-over): On the mountain, risk is everywhere. And the lessons must be learned.

NUOT LIETHA, SKI INSTRUCTOR: We have our skis.

QUEST (voice-over): Nuot has been a ski instructor for years. He knows that, on the mountain, and in the global economy, it's all about balance.

LIETHA: You have to move with the bump and take it like a -- swallow the bump when it coming towards us.

QUEST (voice-over): So far, we've navigated the bump at the fiscal cliff. Now we must negotiate the debt ceiling, high unemployment, social unrest. Again, we learn from the mountain, baby steps to build confidence.

LIETHA: Well, if we ski slowly, we feel what we are doing. And then we get confident and we get faster and faster.

QUEST (voice-over): But economic growth seemingly won't go faster.

QUEST: There's always the risk in the global economy that something goes wrong.

QUEST (voice-over): Snowboarders are like central bankers. They have their own way of sledding down the mountain. For bankers, it means printing money. It's brutal economics.

QUEST: What's the secret of snowboarding?

UNIDENTIFIED MALE: Don't be scared?

QUEST: You pick up speed too quickly, and you end up falling over.

UNIDENTIFIED MALE: No, come on. Like that's when you need to move.

QUEST: Why do you like snowboarding?

(LAUGHTER)

QUEST: If you go too fast, too quickly and fall over.

UNIDENTIFIED FEMALE: Not necessarily.

(LAUGHTER)

QUEST (voice-over): Perhaps the best lesson to be learned in managing risk comes from the cross-country skier. Those hardy experts of slow, steady progress, taking huge amounts of energy.

UNIDENTIFIED MALE: You would need to be fit with the whole body, not only the part of the body.

UNIDENTIFIED MALE: You make the power around. You can slowly or you can a lot speed. It's my way.

QUEST: Ah, the life on the mountain. And if you wonder how all this happened, these are the people who freeze every night, literally, to make QUEST MEANS BUSINESS come to you from davos.

And that is QUEST MEANS BUSINESS for tonight with Jeff, the snowman. I'm Richard Quest. Whatever you're up to in the hours ahead, I hope it's profitable. We're in Zurich on Monday.

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ROBYN CURNOW, CNN HOST: This is the market theater. I'm robyn Curnow. You're watching MARKETPLACE AFRICA and for this week's show, we get a look at where business and ballet meet.

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CURNOW (voice-over): With graceful moves, elegant lifts and twirling pirouettes, ballet is valued as a centuries-old art form. But is it finally viable particularly here in Africa?

ANGELA MALAN, BALLET DANCER: People often ask me, "So, what else do you do? What's your -- like, what's your real job? So you're a ballerina or a ballet mistress or whatever, but what do you -- what do you really do for money?"

"No, I do this, this is my job."

Good! Nice! Drop the side arm a little bit, ladies the same thing.

CURNOW (voice-over): Angela Malan teaches ballet at the South African Zanzi (ph) Ballet in Johannesburg. Unlike many ballet companies in the world, ballet in South Africa has not received government funding for 12 years. And she says running a company with very little funding is not easy.

MALAN: It's a (inaudible) all the time. I mean, business is business. You have to -- you have to pay the bills. You have to pay your salaries. And so we have to do whatever it takes to make this business and this product sellable and good.

CURNOW (voice-over): Here to help the ballet company do exactly that are fixed bright minds from one of the world's most prestigious universities. These Harvard students have come to South Africa to gain some practical experience as part of their MBA course.

UNIDENTIFIED MALE: It's a fantastic opportunity for us to really get out into the world and see how people run businesses outside of the classroom.

CURNOW (voice-over): As the students gain practical experience, the directors of the ballet company gain sound advice.

UNIDENTIFIED MALE: (Inaudible) there are a lot of people here, aren't they, who are a potential target audience that -- and they'll (inaudible) central target revenue. And what's important is just finding ways of capturing that.

UNIDENTIFIED FEMALE: I think about the ballet moving forward, not just as a beautiful art form that, you know, everyone (inaudible) can relate to, but also as really a sustainable business model for the future.

UNIDENTIFIED MALE: And our product, which (inaudible) is the luxury brand of ballet, needs to be sold like any other product, because by keeping us like an (inaudible) company, (inaudible) keep us on our knees (ph).

UNIDENTIFIED MALE: Did you mention thiknig about the ballet as almost a consumer product which, to some might sound strange, but to us it made a lot of sense?

UNIDENTIFIED FEMALE: So you're selling experience. It's not just the poster (ph) you're selling. It's not about teachers (ph) or the shoes or whatever. It's (inaudible) special feeling that you feel when you go see the performance.

CURNOW (voice-over): But apart from selling ballet as a product, Harvard professor Sandra Sucher believes that in order to market professional ballet successfully, you have to be business savvy. It's about taking off your tutu and putting on your business hat.

SANDRA SUCHER, PROFESSOR, HARVARD: I think that there is a discipline to learning how to run yourself as a business organization that is important for an arts company regardless of whether they have government funding.

CURNOW (voice-over): The man heading this ballet company, Dirk Badenhust (ph), speaking to a potential investor here, tells me it costs about $2 million U.S. a year to run a ballet company in South Africa. And ticket sales cannot cover all the costs.

DIRK BADENHUST (PH), BALLET COMPANY HEAD: We recoup about a third of our -- of our running costs through ticket sales.

CURNOW (voice-over): For the other two-thirds, Dirk (ph) has to rely on the generous contributions of South African ballet lovers. But Craig (ph) suggests this is just not enough, and not sustainable for a long-term business plan.

CRAIG (PH): If people aren't willing to come pay in order to see the performance, there's really no xcitemt and it makes it difficult for the government and private companies to continue giving money year after year.

CURNOW (voice-over): But the global economic crisis can people still afford to get excited about what some view as a luxury.

UNIDENTIFIED FEMALE: We have seen it, all of the ballet companies, regardless of where they're located, are being challenged by how do you drive attendance?

CURNOW (voice-over): Jonathan tells CNN that there is excitement about ballet and they've found it in unexpected places.

Poorer places, where people have just a little bit of disposable income.

UNIDENTIFIED MALE: One of the things that was really interesting was when we went out to different areas of Johannesburg. Certainly to some of the areas like Soweto, where we weren't expecting to find people who would be really interested in coming to see something that perhaps people have a preconceived notion that this is a European art form. And what was striking was that a number of those people felt that they would actually be very happy to come and see the ballet, to buy tickets. They weren't afraid of the cost of coming. It was a very kind of aspirational product for them. And the biggest issue was one around transport and whether or not they'd be able to get here. So it was not so much that they weren't interested. It was just that they didn't necessarily know of the way to come to performances or know when the performances were on.

CURNOW (voice-over): One way of combating this, he says, is by taking the ballet to the people.

UNIDENTIFIED MALE: I think it's also time that we move out of our comfort zones in the big theaters and that we actually start touring again and that we take the ballet to the -- to the -- to the army, to farmers, to the bottling plants of big, big companies and businesses, to the -- to the real man on the street and to get them to appreciate the beauty and wonder of ballet.

CURNOW (voice-over): Advice given, lessons learned. This collaboration between Harvard's best and an African performance company may just prevent the curtain from closing on South African ballet.

(END VIDEO CLIP)

CURNOW: Advice there from Harvard MBA students on how to sell ballet as a product.

But what about the risks of the performing arts industry? Just how finally viable (inaudible)?

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CURNOW: He's the grandfather of South African theater, a director, an actor, a playwright. In fact, John Kani's directing the play, "The Island," for which he won a Tony award in 1975. Let's see what John has to say about the performing arts industry here in Africa.

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CURNOW: "The Island" is an anti-apartheid play about Robbin Island. Why is it relevant and why would people want to buy tickets to see it again now?

JOHN KANI, PLAYWRIGHT: Two years ago, I did "The Tempest." We performed at the Baxter (ph) Theater, directed by Jamie Sunderman (ph) in collaboration with the RSC in England. We went to London and performed it. It was written in 1616. Why would you ask me for a play written in 1973, why are we doing it again?

Because it has become a classic.

CURNOW: So from your opinion, as a jobbing actor, playwright, director, who's traveled the continent, what is your assessment of the state of the arts in Africa?

KANI: To talk about arts as art, it's incredible.

CURNOW: As a business?

KANI: Now I'm coming there. Talk about art as art, incredible. The dances, the sculptures, the outfits, the theater, the storytelling, the whole historical redress (ph), fantastic. As the business, we're dealing in poverty. We are known and very famous for our work. We are poor and struggling to make the day meet.

CURNOW: So how does a theater, how does an actor, how does a playwright survive? And who should be paying the bills? Should it be government? Should government fund the arts 80-90 percent?

KANI: The government has a responsibility to provide the infrastructure to create the environment conducive to the growth of arts. To (inaudible) give money, to funding institutions, that would encourage creativity and development within the broader community of South Africa. They should put money into the film industry, through the IDSA (ph), through the National Film and (inaudible) Foundation, through all avenues, through the lottery. They should put money through that. That is, of course, businesses were. South Africa's philanthropy is not in comparison to what happens in America. No one dies here and leaves their fortune to the arts or the ballet or any other foundation. Here people hold onto their money; they almost get buried with it. The sponsorship, people ask, what is in it for me if I go to a cell phone company or a diamond company, or the bnaking institution, they want to know if they give us money for this particular product or production, how would it increase the banking or the number of accounts opened? We're still in that way. I believe that in the next decade South Africans are going to get out of the angst of make money, create jobs, build houses. We're not a nation of houses and jobs. We're a nation. We're a people. We're a people that needs the soul to be nourished, a holistic education and upbringing of a human being is when they can sing, read, write poetry, watch drama, listen to music, watch the ballet and traditional dance. That, you are molding a complete human being.

CURNOW: When it comes to support -- it doesn't need to be sort of cash in hand. Is there the right framework within South Africa for tax incentives, perhaps, if you support the arts?

KANI: This is, again, the other critical area which we have made known to our government, that in other communities and other countries all over the world, there are tax incentives if you give to the art. We need to get to that point where our government realizes that we're part of the reconstruction and development of this country. You can't build roads, you can't build hospitals and schools and build clinics. We're not making love the rest of our lives. We have a responsibility to nourish the soul. This is the only phenomenon that separates us from animals. We read, we can listen to music, we can enjoy. Those that are disciplined by the genre of the arts are disciplined citizens that contribute to the well-being of our own society.

CURNOW: What is African arts industry need to become commercially viable?

KANI: The entity will become more proactive when we create a product. And that will use the experience and partnerships of the people we worked with abroad, who we know how to package it and how to market it and how to sell it. And also be not junior partners in this partnership, but to be equal partner so that we could then begin to create an industry that susts the growth in Africa.

(END VIDEO CLIP)

CURNOW: John Kani there, the playwright and director, talking from the heart.

Well, that's it for this week's show. I'm Robyn Curnow. You're watching MARKETPLACE AFRICA. However, you can always find us online at CNN.com/MarketplaceAfrica. There are links to Twitter and Facebook pages. You'll also find old interviews and stories there. But until next week, goodbye.

END