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Quest Means Business
British Pound Slumped to 31-Year Low Tuesday; U.S. Stocks Surge; Twitter Stock Surges Amid Sale Rumors; Experts: Sinking Gold Prices A Bad Sign for Trump; Kaine and Pence Clash in Vice Presidential Debate; U.S. Evacuations Begin Ahead of Hurricane Matthew; Protesters Shut Several South African Universities; Gold and the South African Economy. Aired 4-5p ET
Aired October 05, 2016 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[16:00:00] RICHARD QUEST, CNN ANCHOR: Goldman Sachs, ringing the closing bell. Good day for the Dow Jones. It's up 100 points. That's a gain of
more than half a percent. I'm feeling optimistic about this gentleman who looks like he's got his act together. Oh, we've been shortchanged. Only
two gavels from Goldman on Wednesday, it is October the 5th. Change is coming to Britain. The Prime Minister, Theresa May, believes the June
referendum was not a vote on Brexit, but on the shape of the country to come.
Shares of Twitter are all a flutter as bids for an all-out acquisition are thought to be only days away. And the price of oil may be key for budgets
around the world. South Africa's fortunes are linked to the price of gold. This man, the finance minister, Pravin Gordhan, will be live on QUEST MEANS
BUSINESS tonight. I'm Richard Quest live in New York. Where of course, I mean business.
(BEGIN VIDEO CLIP)
THERESA MAY, BRITISH PRIME MINISTER: Do we have a plan for Brexit? We do. Are we ready for the effort it will take to see it through? We are. Can
Boris Johnson stay on message for a full four days? Just about.
(END VIDEO CLIP)
QUEST: The British Prime Minister, Theresa May there addressing her party conference in Birmingham. Laughter aside, change is coming to the United
Kingdom. And the Prime Minister May outlined a vision not only for the U.K.'s exit from the European Union, but also the shape of the country to
come. And her stance is that Britain voted for fundamental change in June, and she is going to deliver exactly that.
(BEGIN VIDEO CLIP)
MAY: They find your patriotism distasteful. Your concerns about immigration parochial. Your views about crime are liberal. Your
attachment to your job security inconvenient. They find the fact that more than 17 million voters decided to leave the European Union simply
bewildering.
(END VIDEO CLIP)
QUEST: Theresa May there referring to the elite in the United Kingdom whom she describes as finding the bewildering the change that ordinary people
are seeking. To Birmingham, where the pm was speaking, and Max Foster is there. Max, from day one Theresa May has basically said she wants her
premiership to be about more than just Brexit, but Brexit is going to define her premiership.
MAX FOSTER, CNN CORRESPONDENT: Yes, it did two things didn't it. Basically, the Brexit said Brits want the U.K. to leave the European Union.
She was addressing that earlier in the week and her speech at the beginning of the conference where she said, I do have a timeline for it and we're
going to be out of the European Union by the end of the decade.
But there's also something else that Brexit threw up. And that was a referendum campaign, there was a massive protest vote against the political
elite. That was very much the analysis after the event. So a lot of people felt they were working very hard, but didn't feel that they were
getting a proper share of the success of the country and there was a protest vote in there. So, there wasn't just a vote against the European
Union. There was also a vote against the British government and the ruling elite.
So, very quickly she noticed that and the rest of the Conservative Party, the ruling Conservative Party noticed that as well. And she's really
responding to that in her speech today. She's basically saying, that British politics needs to be closest to the center ground so everyone
benefits from the success of the European economy. And that's what she's talking about today. So she's bringing the Conservative Party to the
center of British politics to meet the people who protested in that referendum vote.
QUEST: But, when we listen -- I mean, even before the conference got under way, she'd already announced that Article 50 will be invoked by the end of
Q1 '17. We've had a chancellor saying it's going to be a roller coaster and there's going to be turbulence, but she still sticks to this idea that,
Max, that somehow it's all going to work out well in the end.
FOSTER: Well, behind the scenes, they will say they can't give the full detail of what they are planning because they haven't agreed at the
cabinet, which is pretty split at the moment. And she wants to take a whole cabinet ahead with her.
[16:05:03] Publicly she is saying, that she doesn't want to give away her hand before she goes into the negotiations in Brussels. So she is trying
to tread the line here and bring everyone in the party together with her. All of those who want soft Brexit, hard Brexit, and you described that
yesterday on the program. She's trying to bring them all with her. And actually there's a lot of goodwill for her, because they see this great
opportunity for the Conservative Party to make huge strides now. Because the Labor Party and opposition is imploding, the U.K. Independence Party
absolutely imploded just overnight. So there's a big opportunity. So they're giving her the benefit of the doubt right now. That's certainly
what's on public view at least.
QUEST: Max, finally, is there now in the U.K. a real feeling that Brexit is going to happen? And that these ideas of a second referendum are a
revisiting of the decision have they been out if bed?
FOSTER: It's sort of depends on who has the final say on this. Because she would say, she has the final say, the government has the final say,
they will back her, she said Britain will be leaving the European Union. There's absolutely no chance of a second referendum. No slap election
either, but there is, you know, obviously some frustration amongst quarters of the British political elite who feel that actually they don't to want
rush into this the way she's rushing into it. So they want to protest in some way. And the way they see that they could do is that by saying that
Parliament should actually make the decisions on when Britain leaves the European Union. So it should be a vote in Parliament. There are court
cases ongoing actually where that will be decided. Will it be her that leads Britain out of the European Union or will it be Parliament? If it's
Parliament, it can slow the whole process down.
QUEST: Max, thank you. Max Foster who is in Birmingham. We appreciate that, sir.
Now the Chancellor of the Exchequer, Philip Hammond, has warned the U.K.'s economy hedging for a roller coaster following the Brexit vote. Philip
Hammond will be with me on Friday at the IMF and World Bank meetings in Washington where QUEST MEANS BUSINESS will be broadcast. That's Phillip
Hammond the U.K. Chancellor.
And in this hour, the South African economy and political system on the roller coaster. And we'll have the finance minister, Pravin Gordhan,
who'll be joining me in the C-suite. We're going to be having a long discussion with Pravin, Minister Gordhan, to discuss not only South Africa,
but emerging markets and of course how it all fits into the U.S. economy.
The pound, let me update you. It hit a 31 year low on Tuesday. It is now at 1.27. So up just a fraction. Joining me to talk about the economics of
all of this, Christian Schultz, economist and director at Citi, and Paul Donovan, a senior economist at UBS. We put two of the best in the business
together to try and give you the analysis. Look, start with you, Paul in Zurich. Paul, the issue now for the markets with Brexit is what?
PAUL DONOVAN, SENIOR ECONOMIST UBS: I think it is getting some kind of clarity over exactly what is negotiating stance and what exactly is proper
policy. Is the U.K. going to be a global company, so global company open for business accepting a foreign investment and accepting what all that
entails? Or is it going to be more closed, more inward looking with a very, very different property in terms of growth. Frankly it depends on
which set of politicians you listen to and which part of which speech you listen to as to whether we're global or insular.
QUEST: And Christian, with that in mind, the pound suffers, but I'm not sure why. Because we're still two years away from an out, as Paul rightly
says. We don't know the strategy. So how much of this sterling weakness is knee jerk?
CHRISTIANS SCHULTZ, ECONOMIST AND DIRECTOR, CITI: Of course in the sense investors react to the news of the day. There is a fundamental story to
this and the harder Brexit gets, the less access to the EU single market the UK's going to have. The more closes going to be, the less growth
that's going to be over the long run, which means returns on U.K. assets are going to be lower. That makes direct investment in the U.K. less
attractive. Less money goes into the U.K. The pound goes down. In addition, if growth is low as both the Bank of England may cut rates again.
And again that would be negative for the pound. So there is a fundamental story to this as well.
QUEST: But Paul, relating to that -- I was reading your views about the U.K. with its current account deficit. It has to fund that deficit, and
does so, by inward investment. But if the pound is down, I mean, U.K. assets are cheaper, but not as attractive in some ways.
[16:10:02] DONOVAN: Essentially the pound, or the value of U.K. assets has to fall to a level where they become an absolute bargain. If there are
other reasons deterring inward investment into the U.K. Now the U.K. has been unusually dependent on foreign direct investment, which is normally a
very good thing. But the thing is with the exit from the EU, foreign companies are saying, well, do we really want to expand our operations in
the U.K.?
And actually it goes beyond that, there are other policies now which are coming through which may make companies question whether the U.K. is an
attractive place to do business. You know, I'm the son of Irish immigrants. And I going to end up on a little list? According to the Home
Secretary, I could do. And UBS will have to testify that. That's not an attractive place to do business.
QUEST: OK, now, gentlemen, both of you. Tomorrow I am at the IMF and World Bank at the annual meeting. I'm going to be chairing -- you'll see a
lot of it on tomorrow night's QUEST MEANS BUSINESS -- I'm going to be chairing the debate, the economics debate. Question for you, Paul Donovan,
what question should I be asking Mark Carney at the Bank of England?
DONOVAN: Well the first one is, is he going to stay or is his job becoming vacant anytime soon? That's always an interesting question. I think the
second thing is the concept of negative rates now fading from central bank fashion. I think the third thing is, how secure is he in the independence
at the Bank of England in the wake of some remarks from the Prime Minister today and indeed in the wake of attacks from certain members of the
Conservative Party in select committee meetings.
QUEST: Christian, similar question for you, but this time, also on the panel with us tomorrow will be, Mr. Schauble, the German Finance Minister.
So, what questions for him.
SCHULTZ: Elections next year, lots of fiscal space, so room to spend for the government. How much is he going to open the purse strings? How much
more is he going to spend after the elections if he's still finance minister?
QUEST: Excellent questions, thank you gentlemen, both of you, you've done my work for me. And for your analysis on it. Great to see you Paul and
Christian. We appreciate it very much, thank you.
Across Europe stocks fell sharply. By the way, let me pause for a moment while you look at the stocks. Let me tell you, that debate, which also as
the Chinese Central Bank governor and of course Christine Lagarde of the IMF. You'll see it on the program tomorrow night. You'll see that debate.
But let's get back to those markets.
They are reacting to reports that UCP could slope on purchases sooner than expected. Now the UCP has denied the rumors. Deutsche bank's shares rose
on reports it's nearing a settlement with the U.S. regulators. One can't always help feeling with a Deutsche Bank at the moment. That when the
shares were so badly beaten done, it became almost a buying opportunity, just because let's face it, where else can they go once they went under EUR
10.
To Wall Street, straight out the gate, and the market goes up and not quite at the top of the session, but pretty close, 18,300 went over and we closed
at 18,281 a triple digit gain. Energy and financial stocks saw the biggest jumps, and of course helped also by a raising price of oil. That rise in
price of oil on the back of the OPEC agreement to cut production. And by the way, I'm writing about oil in the views of T. Boone Pickens in
tonight's newsletter. I'll tell you bit more about that later.
Twitter stocks surged as the rumors of a potential sale are intensifying. Now, they're up 5.6 percent, $24.84. Remember at the same time,
salesforce.com sank by a similar amount, give or take, on reports linking the cloud computing company with an eminent bid for Twitter, and it could
be costly. Here you have really two sides of exactly the same coin. Twitter's potentially up for grabs. Salesforce may be grabbing. Twitter
goes up, Salesforce goes down. Paul La Monica is with me. Paul --
PAUL R LA MONICA, CNNMONEY CORRESPONDENT: Yes, sir.
QUEST: Simple question to begin with. Is Twitter up for sale?
c I think at this point, it has to be.
QUEST: But it has not been confirmed.
LA MONICA: It has not been confirmed, but if Twitter is not looking to sell itself now, the stock is going to crater like a proverbial stone.
Because you had so many rumors lifting the stock by 80 percent from its lows earlier this year. And it's not as if the fundamentals have changed
that much. Even though they've been live broadcasting NFL games, the conventions, that's good news for them. It doesn't explain why the stock's
up this much.
[16:15:00] QUEST: Right, but surely as a publicly traded company, if there was a policy or a plan to put itself on the block, they are obliged to tell
the market. How much is stock up so far this year?
LA MONICA: The stock is now in positive territory for the year, it's up about 7 or 8 percent. But it's rebounded so sharply from the lows, because
it was only a few months ago. Everyone was reading the obituary.
QUEST: Surely the management of Jack Dorsey, they are obliged to make a statement at some point, say, yes we are up for sale. Or no, were not up
for sale.
LA MONICA: At some point, that I think that will happen. Obviously a lot of times, Richard, companies wind up surprising the market. You had no
idea a company was going to be acquired.
QUEST: Right, but you don't normally see --
LA MONICA: But you don't have that massive build up.
QUEST: Right, you don't see dislocation in the market.
LA MONICA: Twitter is going to report earnings either later this month or early November. They haven't given the firm date yet. If they don't
announce something by then, then the conference call and all of the analysts' questions, no one's going to care about what their monthly active
users were. It's all going to be about who's buying them and are they for sale? Salesforce, obviously the market doesn't like that. I still think
it's going to be Google that winds up winning, assuming Twitter does actually get sold.
QUEST: I think we have a weird bet on that. Don't we?
LA MONICA: We did. I can't remember exactly. I think it might've involved sushi if I remember correctly.
QUEST: What I can't remember is which way the bet went.
LA MONICA: I think if Salesforce bought Twitter, I might have to take you to Nobu.
QUEST: Nobu. Excellent idea. Good idea. Thank you very much.
LA MONICA: Corporate cards, of course.
QUEST: Of course. Is there anything else but the corporate card? Right. A Golden moment for Hillary Clinton. The precious metal has fallen in
value and some experts say that's bad news for Donald Trump. We're going to discuss the highlights from the vice presidential debate. QUEST MEANS
BUSINESS and we are delighted that you're with us for the ride.
(COMMERCIAL BREAK)
QUEST: Gold prices have recovered largely because of the three months. They're still up more than 6 percent since early July. Now, one of the
expert's views is that gold is a bad sign for Donald Trump. This earlier this week, we showed you that polls aren't the only way you can measure a
candidate's chances. Stocks have been an accurate predictor for some 70 years. A fall in stock prices usually points to a win for Donald Trump.
If they rise, then the needle will swing the other way. And as you can see, the way which they've been going at the moment.
Now if you do the same with gold, the recent falls show that prices and investors believe that Clinton is gaining in momentum. And now, why this
is relevant in that sense, is because obviously there's a safety, a stability, a much more known modicum of less risk in that sense with a
Clinton win. Therefore, gold prices are falling.
[16:20:02] But of course, investors believe a president Trump would boost gold prices, not only because of his unpredictable and inward looking
policies, but also you have got the issue of course that a Trump presidency is widely believed to balloon the deficit. That could obviously have
inflation implications and ultimately that shoves gold up under the old traditional prices. You could see their stocks pointing towards the Trump
victory. Gas prices pointing to a Clinton victory, gold price pointing again towards a Clinton victory.
Trump had good news from Tuesday night's vice presidential debate. Debate watchers say that Trump's running mate, Mike Pence, performed better than
Tim Kaine, 48-42 percent was the view there. Completely opposite of course compared to the presidential candidate themselves on their first debate.
But it was a night filled with insults and interruptions. And most of the interruptions were going one way. CNN's Phil Mattingly watched closely.
(BEGIN VIDEOTAPE)
TIM KAINE, U.S. DEMOCRATIC VICE PRESIDENTIAL CANDIDATE: Trump's supremacist.
MIKE PENCE, U.S. REPUBLICAN VICE PRESIDENTIAL CANDIDATE: I must have hit a nerve here.
PHIL MATTINGLY, CNN CORRESPONDENT (voice-over): Hardly contentious from the start.
KAINE: I can't imagine how Governor Pence can defended the insult driven, selfish me for style of Donald Trump.
MATTINGLY: The vice presidential debate becoming a night of whose candidate is more insulting.
PENCE: Senator, you and Hillary Clinton would know a lot about an insult- driven campaign.
MATTINGLY: Tim Kaine repeatedly putting Mike Pence on the defense using Donald Trump's own words.
KAINE: He's called women slobs, pigs, dogs, disgusting. He went after John McCain, a POW, and said he wasn't a hero.
MATTINGLY: Words Pence, in many cases didn't directly defend.
KAINE: When Donald Trump says women should be punished or Mexicans are rapists or criminals or John McCain is not a hero, he is showing you who he
is.
PENCE: Senator, you whipped out that Mexican thing again. He -- look --
KAINE: Can you defend it?
PENCE: There are criminal aliens in this country, Tim.
MATTINGLY: instead trying to take a similar tact against Hillary Clinton.
PENCE: He still wouldn't have a fraction of the insults that Hillary Clinton levelled when she said that half of our supporters were a basket of
deplorables.
MATTINGLY: Trump's running mate at times flat out denying statements that the billionaire has made in the past.
KAINE: Donald Trump and Mike Pence have said he's a great leader. And Donald Trump has --
PENCE: No, we haven't.
DONALD TRUMP, U.S. REPUBLICAN PRESIDENTIAL CANDIDATE: I have respect Putin, he's a strong leader.
KAINE: Donald Trump's claim that he wants to -- that NATO is obsolete. And that we need to get rid of NATO is so dangerous.
TRUMP: NATO is obsolete. NATO either has to be rejiggered or re-changed for the better.
MATTINGLY: Kaine frequently interrupting Pence.
KAINE: Let me talk about this --
PENCE: Senator, I think I'm still on my time. He says --
KAINE: Hold on a second, governor.
PENCE: This is my time, senator.
MATTINGLY: And attempting to prove Trump's unfit for office by quoting Ronald Reagan.
KAINE: He said the problem with nuclear proliferation is that some fool or maniac could trigger a catastrophic event. And I think that's who governor
Pence's running mate is. Exactly What President Reagan warned us --
PENCE: Senator. Senator, that was even beneath you and Hillary Clinton. And that, that's pretty low.
MATTINGLY: Kaine hammering pence on Donald Trump's refusal to release his taxes.
KAINE: And he said if I run for president, I will absolutely release my taxes. He's broken his first promise. Second, he stood on this stage --
PENCE: He hasn't broken his promise.
KAINE: Stood on the stage last week and when Hillary said you haven't been paying taxes. He said, that makes me smart. So it's smart not pay for our
military. It's smart not to pay for veterans, it's smart not to pay for teachers.
PENCE: His tax returns showed -- he went through a very difficult time, but he used the tax code just the way it's supposed to be used, and he did
it brilliantly.
MATTINGLY: As pence touted the message Trump advisers desperately want their own candidate to make. That they respect change.
PENCE: What you all just heard out there is more taxes, $2 trillion in more spending, more deficits, more debt, more government, and if you think
that's all working, then, you look at the other side of the table.
MATTINGLY: Both candidates asking Americans to trust their candidate. And distrust their opponent.
KAINE: We trust Hillary Clinton. My wife and I. We trust her with the most important thing in our life. We have a son deployed overseas in the
Marine Corps right now. We trust Hillary Clinton as president and commander-in-chief. But the thought of Donald Trump as commander-in-chief
scares us to death.
PENCE: There's a reason why people question the trust worthiness of Hillary Clinton. And that's because they're paying attention.
MATTINGLY: The fiery debate ending with a testy exchange on abortion and faith.
PENCE: I sought to stand with great compassion for the sanctity of life. We can create a culture of life.
KAINE: Why don't you trust women and make this choice for themselves? We can encourage people to support life, of course we can, but on fundamental
issues of morality --
[16:25:07] PENCE: Because --
KAINE: We should let women make their own decisions.
(END VIDEOTAPE)
QUEST: So to another big story we're following. Hurricane Matthew is carving a destructive and deadly path upwards to the northern Caribbean.
You're well familiar with it. Take a look at what it's left behind. We know it started down in the Dominican Republic -- or in Haiti and Port-au-
Prince -- comes up, goes past Santiago de Cuba over the island of Cuba and now heading up toward the Bahamas and to Nassau. So far at least ten
people have been killed in the Caribbean. It has been downgraded marginally, category three storm as it's baring into the Bahamas.
It could go -- of course you'll be well familiar -- as it goes over open water, once again, it picks up the moisture from the warm waters and it
intensifies the force of the hurricane. Mandatory evacuations for some parts of the country are now under way. In the Florida, you can see cars
are ling up at various gas stations. And in shops, shelves are being emptied as people are stocking up on the usual supplies that people do.
Boris Sanchez is in Daytona beach in Florida. Tom Sater is tracking the storm's movements from the CNN Weather Center. First we go to Boris.
Boras -- actually, boras, hold your horses there for one second. Let us go to Tom first. Tom, very quickly, tell us where the hurricane is and where
it's heading next.
TOM SATER, CNN METEOROLOGIST: Well, believe it or not, it's just pulling out of Haiti. Water levels are still rising here and the concern is highly
contaminated water after their cholera outbreak. It took 10,000 lives. States of emergency, Richard, for North Carolina, South Carolina, Georgia,
and Florida. The system is still, as you mentioned, did lose a little strength. Category three still considered a major hurricane. Now
landslides problem could still occur in Cuba. We've got nine meter surges right now for the Bahamian island nation. There are 700 islands, 400,000
live here. They're all under warnings. The majority of people live in Nassau. And if you look at the forecast, puts Nassau, Bahamas right in the
strongest area of winds. It's going to be a problem with four and five meters' storm surge. Now the question is what's going to happen in the
eastern U.S.
QUEST: All right, Tom. You're watching the progression on the map, Boris Sanchez is in Florida, in Daytona Beach. How are the preparations coming
along?
BORIS SANCHEZ, CNN CORRESPONDENT: I can't hear anything.
We might have lost Boris. Boris, can you hear me?
SANCHEZ: Hey Richard, I apologize, I'm having a hard time hearing you. But I give you an idea of where we are right now. This is Daytona Beach in
central Florida. And we are expecting this storm to potentially just graze the coast, but the governor here in Florida, Rick Scott, saying that
everyone here needs to prepare for a direct hit. This could be a potentially catastrophic storm. He called it dreamily dangerous with
numerous fatalities in the Caribbean.
So far here, there are mandatory evacuations just south of us in Brevard County. You can expect those to continue to amplify. Especially on
coastal community communities and barrier islands like the one where we are right now. Aside from that, there have been extremely long lines at gas
stations. I actually spoke to a friend this morning who told me she waited in line for over an hour, and had to leave empty handed because the gas
station simply ran out.
They were also grocery stores aisle after aisle that have been emptied out. People buying water and nonperishable food items. We've also seen a rush
at hardware stores where people are buying things like flashlights, battery, and wood, to board up their homes and their windows. We actually
have some doors here at our hotel that are boarded up right now. We've been told we may have a to evacuate at some point once the storm gets
closer. Once we get into Thursday evening and early Friday morning. Of course the concern is that the cone of probability for the storm is
extremely wide so the idea here is again from Governor Rick Scott, prepare and be ready if you think you're going evacuate, do it now ahead of time
before it's too late, Richard.
QUEST: Boris Sanchez and Tom Sater, thank you.
It's a stalled economy some people say. It's a presidency mad in corruption scandals, most people agree. And now the student protests.
South Africa's problems are running deep. The man who has the economy at his helm, is the finance minister Pravin Gordhan, he is on QUEST MEANS
BUSINESS, next.
[16:30:00] (COMMERCIAL BREAK)
QUEST: Hello, I'm Richard Quest. There is more QUEST MEANS BUSINESS in a moment. As slowing growth and turbulent gold prices and a corruption
investigation, the matters on the plate of the Finance Minister, Pravin Gordhan. South Africa's finance minister will be with me live after the
break. And she has not been cheating. Chief executive Warner Mariani, Sharapova's top sponsor speaks out on her reduced ban from tennis. You're
watching CNN. And on this network, the news always comes first.
CNN poll says Republican Mike Pence won Tuesday's contentious vice presidential debate. Viewers gave him the edge by a margin of six
percentage points over Senator Tim Kaine. But a senior campaign aid tells CNN, Donald Trump was not pleased, saying Pence didn't do enough to defend
Trump's positions.
The Bahamas is now bracing itself for hurricane Matthew after pounding Haiti and Cuba. The deadly and dangerous storm is expected to move through
the island over the coming hours. The hurricane is then forecast to make landfall along Florida's east coast.
France is making a new push for a ceasefire in the besieged Syrian city of Aleppo. The Foreign Minister, Jean-Marc Ayrault, will travel to Moscow and
Washington over the week to lobby for a draft UN resolution that will pave the way for a humanitarian truce.
A man has stabbed two police officers in Brussels and Belgium and the Federal Prosecutor's offices calling it a terrorist attack. The suspect
was shot in the leg. The officers' injuries are not said to be life- threatening.
Italy's Coast Guard has rescued almost 11,000 migrants in the past few days. Three of them have been babies that were born on rescue ships.
Good weather sparked the massive surge of migrants leaving Libya. The rescuers say that nearly 30 people have died of suffocation in one
overcrowded boat.
New protests by students in South Africa have forced a number of universities to suspend classes. Now the students are demonstrating
against the rising costs of university education. Many black South Africans say it's too expensive for them and they clashed with the police
earlier this week. The protests have become a symbol in the inequality prevalent in the country. Now after more than 20 years since the ending of
apartheid.
There are many problems of which we're going to discuss them now. The economy is pretty much stalled. The IMF says it will grow just by 0.1
percent this year and then pick up next. President Jacob Zuma has been marred in corruption scandals and legal battles. And the ruling party
suffered a significant loss in recent local elections.
The rest of course we're reported on this program and discussed revolving doors at the finance ministry. My next guest was called in to become a
third finance minister in a turbulent week late last year. Pravin Gordhan, with good see you sir.
PRAVIN GORDHAN, SOUTH AFRICAN FINANCE MINISTER: Good to see you again. Thank you for having me.
QUEST: We've talked since you've been back before, but the situation in South Africa is not good at the moment.
[16:35:02] GORDHAN: It's not good, but it's not bad either.
QUEST: Hate to see a really bad time then.
GORDHAN: Well, we're not in gestation. So that's good.
QUEST: Barely, minister, barely.
GORDHAN: You know, being above zero matters. And as well as technical gestation is concerned as you know. And we think we're beginning to see
some green shoots. And certainly in the next calendar year, we see better growth than the zero point whatever we are seeing that the particular point
in time. Tough times, I admit that. But enough is not the worst. We will certainly do better as we go forward.
QUEST: We've got you for a big chunk of time. We're not rushed in that sense. I want to start off first, well obviously, with your own legal
difficulties. The investigation into what you to or did not do when you were at the revenue, commissioners of the revenue. Are you worried that
you are -- that you are the subject of an investigation that ultimately could turn into some form of prosecution?
GORDHAN: Firstly, I'm not worried because I haven't done anything wrong. Secondly, I've already described it this week as political mischief. And
thirdly, hopefully these storm clouds will pass and some sense will come to those who think that they want to make the case against and about nothing
in particular. But these are parts and symptoms of political conversation in our own country and political noise as well. So, right now, I'm focused
on my job as finance minister, running the treasury, and in three weeks' time, delivering what we call the region term budget policy statement.
QUEST: The rumors are that many of these investigations and indeed the spin against you, is coming from the president himself because you are
opposing many of his deficit spending mechanisms.
GORDHAN: Now, only the president accepted the treasuries advice from our inception in 2009, when I served my first finance minister. And certainly
since December, the government has a whole has understood that we are in difficulties and that we have to live with the money that we have
available.
QUEST: How would you describe your relationship at the moment with the president?
GORDHAN: I know the president from 1974 when he came out of Robin Highland after a 10 years' stent. So the relationship was a professional one, and
that's the way it should be.
QUEST: And you're not at the moment feeling under threat. You don't feel that they want you gone.
GORDHAN: Whoever they might be, you know, it's only one person that hires and fires the minister in government, and that's the president. He's
repeatedly said in recent times that I enjoy his support. And at a difficult time like this, I think the country wants stability, both from
the corporate sector from the trade union movements and more importantly, the citizens at large. And I think the treasury and my colleagues who work
with me in the minister's committee on the budge enjoy that support.
QUEST: On the issue of, for example, the falling gold price. I mean, to some extent as minister, you have to -- you've seen it go up, you've seen
it go down. You've had to live with both, you obviously prefer a higher than lower. But how worried are you now, about the gold price and the gold
industry?
GORDHAN: I think it's more the commodity is a cycle generally, where gold is a bit of an exception, but the demand factor having dropped China being
weighed as economically speaking, it's inability to absorb raw materials from Brazil or Australia or South Africa, having declined. Has an impact
on all of our economies at this point in time? For the gold industry in South Africa has been in decline, for the extremely good coal miners who
are doing their best. And I suppose to depreciate the value helps them as work.
QUEST: We'll be more with you in just a moment when we're looking at emerging markets and the growth of the economy. Stay with us. Please do.
Will be back with the minister to see whether -- and to discuss the reliance on the precious metals after the break.
(COMMERCIAL BREAK)
[16:41:12] QUEST: We're back with South Africa's finance minister, Pravin Gordhan. When you're all at the IMF this week -- now the one thing the IMF
is very clear about in the world economic outlook, which came out yesterday, is that developing economies are slowing down. Or at least not
growing as fast, but emerging markets will be --
GORDHAN: Picking up.
QUEST: -- picking up. Do you see your economy as one of those?
GORDHAN: It'll do better than what -- as I said, the next year we see growth about 1 percent and we'll get --
QUEST: But what's driving that growth about 1 percent? If you're only getting .1 percent this year, what's driving it for next year to get above
that?
GORDHAN: I think what we're going to have is better domestic demand. We're going to have certain exports into the African continent better than
this year. Africa 1.6 percent this year, and new estimates are over 3 percent and 30 percent for manufactured products go into the African
continent as well. Tourism has been an important factor. Fourteen percent increase in the number of tourists that are coming into the country.
Manufacturing sector has been doing better on and off but it's still better.
QUEST: If we look at the issue you'll be dealing with at this year's IMF, you've got rising U.S. interest rates in a slowing U.S. economy. You've
got Brexit out of the U.K., and you've got a deeply unsatisfactorily and unhappy globalization on trade issues.
GORDHAN: Absolutely. And all of them are absolutely important issues. And many are talking about a low growth course for economies around the
world except for maybe India and China, but the world more generally. And secondly that, I mean, the estimates going down for the United States is
not very helpful. One being the biggest economy in the world. Brexit creates a lot of uncertainty both for Europe and the U.K.
QUEST: So what do you want out of this IMF? What are you hoping to get?
GORDHAN: you know what we're missing is the kind of collective action and world that we saw in 2008, 2009, 2010.
QUEST: You're not going to get it.
GORDHAN: We're not going to get it. The G20 meeting in China certainly seemed to indicated that. Where there was consensus is concerns around the
issues of inequality, globalization, de-globalization. The fact that the citizens are losing trust in politicians, bankers, and CEOs, and hopefully
--
QUEST: And minister.
GORDHAN: I said politicians. Hopefully that inspires us to take citizens a lot more seriously and overcome the inequality issues.
QUEST: Why should we have confidence? Bearing in mind it takes an explosion like Brexit, or like the FARC in Columbia referendum, or like the
Donald Trump ascendancy. It's only when you're all hit on the head with something that you don't really to want happen that you do anything.
GORDHAN: Not really. I think there are good examples of political leaders who try to take initiatives within, you know, serious consensus, and in
South Africa, for example, at the beginning of the year, notwithstanding the difficulties that we had in December last year. We've had eight-month
period in which we've worked very closely with labor and business sector, and that's why we are in New York for the last two days. And that's
beginning to increase confidence, get better trust going. Get corporation going, and that'll inspire investment in our economy both internally and
externally as well.
QUEST: Finally, when we look at the elections that took place in South Africa and the ruling party got a bit of a bloody nose. I think you would
agree with me on that.
[16:45:02] GORDHAN: It was a wakeup call, definitely.
QUEST: It was a wakeup call for what? And for what new policies?
GORDHAN: It's a wakeup call to take citizens more seriously to deliver on projects that we have in mind. And to ensure that we don't do things that
lose trust of those very same citizens. So the ruling party, the ANC, has been reflecting on this over the past month or two recognizing where our
difficulties are and recommitting ourselves to basic values that Mr. Mandela and others left us.
And finding ways to ensure that we in the years ahead up to the next election, certainly
the general election in 2019, practice what our leads have preached before. And what our constitution requires of us.
QUEST: Going to be a good meeting in Washington, thank you, sir.
And we will be at IMF and World Bank meetings this week. You're going to hear from the German finance minister. Wolfgang Schauble, the U.K.
Chancellor of the Exchequer, Phillip Hammond, and the IMF director Christine Lagarde, the debate will take place tomorrow in fact between the
managing director, the chairman finance minister, the governor of the Bank of England, the governor of the Central Bank of China.
As we continue tonight, so you want a new accessory for your mac. It's sold out faster than the iPhone. It's literally a question of dollar and
cents. I'll explain after the break.
(COMMERCIAL BREAK)
QUEST: As reported, the tennis star Maria Sharapova has had a two-year doping suspension reduced to 15 months. As she was disciplined after a
drug she was taking had been added to the banned list. She either didn't realize or was careless, and she now tells CNN's Alex Thomas the
International Tennis Federation wanted an even longer ban than she originally got.
(BEGIN VIDEO CLIP)
MARIA SHARAPOVA, PROFESSIONAL TENNIS PLAYER: I have been asked the question if I had been treated fairly or not, and the ITF asked for me to
be banned for four years. And is that fair? No, I don't believe that's fair at all.
ALEX THOMAS, CNN ANCHOR: But do you think you'll continue to be called a cheat by many on social media?
SHARAPOVA: Um, well social media is a big part of our society, and there's a lot of things that you can be called on social media that you just have
to avoid. And as I did, it's part of our society, I know who I am and I know how I've played the sport since I was a young girl with integrity,
I've never taken the easy way out. I'm one of the biggest fighters in the game. I love what I do and I will continue to keep doing it. And forming
my legacy.
(END VIDEO CLIP)
QUEST: Head was one of the sponsors that stuck with Sharapova throughout the suspension. The tennis equipment maker is being criticized for
tweeting its congratulations after the ban was shortened.
[16:50:02] Speaking to Alex Thomas, Head's chief executive Johan Eliasch says he has no attention of backing down.
JOHAN ELIASCH, CEO, HEAD N.V.: This is a case of what is right and wrong. And it is clear here that she has not been cheating. I mean, she was
vindicated, but this was not intentional. It was a mistake. There is no doubt she broke a rule. You can question then as we talked earlier,
whether it is a rule of substance in the first place. But, the fact of the matter is it's very clear she has not cheated. And got something no one
would support.
THOMAS: This is a cynical world as you know. There are going to be plenty of people out there saying there's one obvious reason why you would stand
by the world's most marketable female athlete.
ELIASCH: Well, we all actually have a choice. And one of the benefits, if you suspend the contract, which you can in the instance like this, you
don't have to pay the athlete. And in our case, we chose to do what we believe was right, which was to stand behind her. And I'd also like to add
that apparently their substance was banned because of the prevalence of Meldonium use by eastern European athletes.
And maybe this has an element of the Russia bashing in it. And that's another thing I don't, I don't think politics or sport should be mixed up.
(END VIDEO CLIP)
QUEST: Now, an extraordinary story that perhaps tells you some days anything will sell. Think about the smell of a new computer. Or in this
case, the MacBook Air. For the tech geeks, it is the ultimate aroma. Just think about it. The loving smell. Is it a new car or a pair of gloves?
Well, no, now this a new smell, I jest you not is available in candle form.
It's from a company that makes macs accessories and this candle, which is called new mac, sold out in just two hours. It costs $24 and you could buy
50 of these for one cost of a laptop. It burns for 45 to 50 hours versus a mere nine, ha-ha, for this old new thing. And the smell itself is like
mint, peach, basil, lavender, and sage.
And there's one born every moment. Because there are a few other scents we thought you might like to buy. How would you like to buy the scent of, for
example, the white castle burger? Or maybe the locker room candle smell. That should enjoy the day. And then, to prove that every candle has a
silver lining, there is always the delicious smell of the Donald Trump candle.
And now, final check on the markets while we just allow the aromas to spread around the QUEST MEANS BUSINESS studio. Walk over the MacBook. The
quick look at markets and how they closed the session.
Dow Jones ended with a triple digit gain of 112 points. Important to point this out to you because energy and financial stocks saw their biggest jump.
They were helped by a rise in the price of oil. And in Europe, stocks there, investors reacting to reports of the ECB could slow bond purchases
sooner than expected. The ECB has denied rumors.
Deutsche Bank shares rose on reports it's nearing settlements with U.S. regulators. The newsletter tonight, interesting because we're talking
about the price of oil. You will be well familiar with what's been happening there. Oil is on the upswing and I've been tug to T. Boone
Pickens about the price of oil. It's at CNNmoney.com/quest where you can subscribe to our newsletter. Oil, oil, and T. Boone Pickens views in
tonight's newsletter. It's a profitable moment after the break.
[16:55:00] (COMMERCIAL BREAK)
QUEST: Tonight's profitable moment. These are very uncertain times in the global economy as we heard yesterday from the IMF with its world economic
outlook. Oh to be sure, global growth is going to be between 3.1, 3.2 percent. Maybe just a smidgen lower.
Look underneath and you see the undercurrents tell a very different story. You see the United States slowing down. You see Europe still expecting to
probably to have even more monetary easing. The ECB may have to do more work. And you've got the United Kingdom, Madame Brexit and talking of
that, just look at the situation with the pound. The pound fell again, 31- year low at 127 to the dollar, even worse obviously against the euro.
Yet you have got Theresa May the U.K. prime minister extolling the virtues of Brexit which she has to do to keep her own party on her side. Talking
of opportunities rather than costs. And that's why the next two days of QUEST MEANS BUSINESS you really won't want to miss.
We're at international monetary fund, the IMF and World Bank. And you're going to hear from tomorrow's program, the top speakers -- the governor,
governor at Bank of China, the deputy governor. We've got the finance minister from Germany, both going there. Governor Mark Kearny of the Bank
of England. And of course, you've got Christine Lagarde, the managing director of IMF. You'll hear on tomorrow night's program too.
In addition, finance ministers and central bankers galore over the next two days. We'll be in Washington. You will be too. Because that's QUEST
MEANS BUSINESS for tonight. I'm Richard Quest in New York. Whatever you're up to in the hours ahead, I hope it's profitable. I'll see you in
D.C. tomorrow.
END
