Return to Transcripts main page
QUEST MEANS BUSINESS
Strike in South Africa; Argentina Shuts Down Major Internet Service Provider
Aired August 20, 2010 - 14:00:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, HOST, QUEST MEANS BUSINESS: South Africans on strike, public servants say a 7 percent rise, not enough.
Financial reform would have saved Bear Stearns, its former chief executive tells CNN tonight.
Argentina's government shuts down its major Internet service provider. Why?
It's a Friday. I'm Richard Quest. I still mean business.
Tonight the sun is setting on a third day of strikes in South Africa; vital public services, health care, education, law enforcement, all of them on their knees. And we've seen violent clashes between police and protestors outside hospitals. It looks like unions are in for the long haul with more than 1 million government employees set to stay away from work next week.
Today unions began talks with government, but so far there has been little progress. Now the strike isn't just causing huge inconvenience to a lot of people, it could do serious damage to the South African economy, already just rebounding from the throws of recession and the problems of the financial crisis.
If you join me in the library you will see what I mean. The budget gap, now we know the government of President Zuma has had a very firm policy. It was a growth policy of jobs, it promised there wouldn't be too many layoffs. But the reality is there is now a 6.7 percent budget deficit. If there is a significant pay rise, that could not only deepen or at least prevent a deficit reduction, but it would of course stoke inflation. The government knows that and even the offer that is being made is on the high side, bearing in mind what we've been seeing elsewhere.
So, the GDP growth in South Africa is 2.9 percent. Largely what people always think about on an annualized basis, 4.1 percent, Q1. Now you have got to bear in mind the strength and growth areas of the South African economy. We tend to think of it as mining, commodities, but also industrial production, the car manufacturing, machinery manufacturing, also crucial parts. So if the rest of the world is coming out of recession and there is growth in India and in China, South Africa stands to gain, too. But there are still problems, out of work, in the Q2 the rate of unemployment hit 25.3 percent. That is the official rate. And of course there is a very large part of the informal economy underground, and aren't working, that takes place. Which of course, raise problems for taxation increase-taxation revenues and the like.
We need to talk about this with our Iraj Abedian who is on the board of development of the Bank of South Africa, and an economic policy advisor. The founder and chief executive of the investment company, Pan-African Capital Holdings, Iraj, joins me.
How damaging is this strike, if it continues, bearing in mind its public sector workers not private capital?
IRAJ ABEDIAN, CEO, PAN-AFRICAN CAPITAL HOLDINGS: Richard, it is-the trick (ph) of it is how long it will last. It is the third day. It has brought public education to a halt, as well as public services, in health, particularly. And the fact that it has become violent and confrontational has taken a political dimension, which is very harmful for the economy. It begins to cast doubts on the ability of the government to maintain stability in the country. And so, in that regard it certainly matters for the economy and (UNINTELLIGIBLE) the impact, we have to wait and see how long it will take.
QUEST: If it does last, any strike of more than 1 million people, in any economy, is a serious matter. But at what point does that GDP number, I was talking about, start to go into serious jeopardy?
ABEDIAN: I think if it lasts beyond a week, uh, or 10 days, its impact on the GDP begins to become material. But the growth as it is, is very tentative. Many of the sectors are showing signs of very, very, very tentative growth, especially on the consumer side. And bearing in mind that the government with 1.5 million employees is a very critical plank of that consumer spend. And so, if it goes beyond two weeks it begins to impact the GDP quite severely.
QUEST: You see, the government is offering 6.5 or 7 percent, strikers looking for 8 percent, plus. Even a 7 percent pay rise, with attendant conditions, would prevent deep deficit reduction.
ABEDIAN: Absolutely. Especially that the government has made, back in February of this year, has made a commitment to bring the deficit below 5 percent over the next three years.
ABEDIAN: There is no doubt that even at 7 percent it would be very difficult to meet that target, especially that on the revenue side GDP is not (ph) performing, and government revenue has been under stress (ph).
QUEST: But you see-but you see-we know that there are-there is a strike season and that everybody does march for more money. Finally what do you think tipped the workers over the edge? Because effectively they are striking against a left wing, or a predominantly left leaning, administration that promotes workers' rights.
ABEDIAN: Absolutely. That is the (AUDIO GAP) dimension of it, that the union members, especially, are (UNINTELLIGIBLE) members. They thought they had their man in high office. The though President Zuma is not going to resist (UNINTELLIGIBLE). Especially that he came with the ticket improving the jobs (UNINTELLIGIBLE). And so there is a great deal of disillusionment that has translated to the political resentment which means the unions are playing hardball at the moment.
QUEST: Iraj, many thanks indeed. Joining us from Cape Town in South Africa. Lovely to see you, as always on our program.
ABEDIAN: Thank you.
QUEST: Giving us understanding of what's happening in South Africa.
So, to Johannesburg, from Cape Town to Jo'burg, our correspondent Diana Magnay. Diana is with me now.
Diana, you may have been listening to our economic discussion then. The niceties of deficit and growth numbers doesn't seem to be cutting any mustard, if you like, with the strikers at all?
DIANA MAGNAY, CNN INT'L. CORRESPONDENT: Not at all. As far as the unions are concerned they think the government is pleading poverty. And that the government probably can afford to increase their offer, at least to a certain extent, or to come to some kind of constructive solution. Rather than saying, which they are saying at the moment, you have 21 days, unions, to reconsider your offer, at which point we will just unilaterally implement ours.
The union have been saying that that is an unconstructive way of going about negations. The unions don't just want this pay rise, they also want other issues to be addressed. Such as, discrimination to married public sector workers; they, for example, only get one housing allowance. Whereas, if you are just living with a partner you can get two housing allowances. They say that the lowest paid public sector workers can't afford a mortgage because they don't get paid enough, but don't qualify for state housing. So it is not just the housing allowance and the wage hike that they want to see addressed. They want to see the government come to the table with all sorts of other issues, so that they can have a proper discussion about those issue, also.
And there is still the question of a minimum service level, agreement that hasn't been agreed upon, which is why you have this gray area of some union members striking and intimidating other people from going in to- essential staff from going into hospitals and that kind of thing. Even a minimum security, a minimum service level hasn't been finalized since-so, there are many things that the unions want to see the government address, Richard.
But Diana, if we look at the affects of this strike, is it one of these strikes that often is the case, is predominantly hitting the poor, because they are the ones that rely most on government services, even more so, in South Africa.
MAGNAY: Absolutely. That is the sad fact of the matter. Those that cannot afford private healthcare, those who cannot afford private schooling are being seriously affected by this. The situation in the hospitals right now is fairly desperate. You are having patients transferred to private hospital who need emergency care. But there are also reports of people dying and the picketers, the people on the picket lines have stopped supplies, food, from coming into the hospitals. And that is why you are seeing military forces, military health personnel deployed to the hospitals, to try and resolve this situation, Richard.
QUEST: Diana Magnay, in Johannesburg for us tonight. Diana, have a good weekend. I suspect it will be a busy one as you monitor this strike and continue working this story.
In a moment, job creation, financial reform, and angry voters, a hesitant economy and high employment, they are the back drop as Washington heads to the mid-term election campaign. We've been talking about it with some of the most prominent figures in the financial world. We'll hear from them next.
QUEST: Two of the top players in the financial world say America is angry; 14.5 million people are out of work. And they wan the chance to find jobs. In New York, Poppy Harlow joins us live from CNNMoney.com's newsroom.
I mean, yes, we know America is angry. I'm just a bit concerned that the two people saying they're angry, their industry, Poppy, is largely responsible for the anger and the mess that the others find themselves in.
POPPY HARLOW, CNN MONEY.COM: It is exactly right. We sat down this week, Richard, with Dick Parsons, he's the chairman of Citigroup, and also Alan Schwartz, he was at ht helm of Bear Stearns, when that firm fell not too long ago, in the midst of the crisis. These two men were joining us to talk about financial reform, they addressed that. Of course, it is the new law of the land, whether or not the bankers like financial reform in this country.
But then that conversation really shifted to jobs and what they think the Obama administration needs to do to get the private sector hiring again. An interesting conversation. Here is a bit of what we talked about.
DICK PARSONS, CEO, CITIGROUP: The bill heads in the right direction. And I would have a lot more confidence answering in the affirmative a question, you know, did this bill get it right to prevent exactly what happened last time? Than, does this bill create a regulatory paradigm that will keep something, that none of us can really identify right now, from happening in the future.
HARLOW: Are they policies now that spur growth? Because I have to tell you, talking to business leaders from the technology sector, to Wall Street, their argument it seems to be is that the economic policies being put in place right now by the administration and looking back at stimulus, are not doing what they need to create private sector jobs.
ALAN SCHWARTZ, FMR. CEO, BEAR STEARNS: The administration has to balance to, you know, sort of ends of a pole that are very, very difficult to balance. On the one hand, there is an anger toward Wall Street and bankers, but in my opinion that is just the tip of the iceberg. There is a anger against the distribution of wealth in the country, in total. There is an anger at the separate outcomes of the top and the bottom. And that is an underlying anchor. So when you get a problem like we had in the financial crisis, it pours out. It is deep. And I think people in Wall Street and in the business community, way under estimate how deep that is.
On the other hand, if you don't have policies that promote new capital being invested, as I said earlier, the economy will just simply not grow. And we will have a problem. I don't think-
HARLOW: Are the policies promoting that?
SCHWARTZ: I don't think the policies that have been promoted to date are a real problem. I think it is the complete uncertainty as to what the total agenda is.
PARSONS: Because the number one priority has to be job creation, right now. Not fixing a broken financial system, not fixing a broken health care delivery system, not fixing a couple of broken whatever-how we create jobs? So, it is not so much the policies that have been brought to bear in terms of fixing those pre-existing problems, that we inherited, it is the absence of policies that are focused on and targeted towards job creation.
HARLOW: There you heard it. The absence of policies in the U.S. targeted at private sector job creation. And you know, this coming from Dick Parsons, and also Alan Schwartz, two supporters of the Obama administration. Their biggest, and really, their only criticism of the economic policy so far, Richard? That it has not done really anything at all to stimulate private sector job growth, Richard.
QUEST: Dick Parsons, former chairman, chief exec of Time Warner, our own company, has to be one of the smoothest operators and diplomatic chief and chairmans in the business, doesn't he?
HARLOW: He is. He certainly is.
QUEST: Well, I was just going to ask you on that point, does it lie in these men's philosophy, does it lie in their realms (ph) to be making these comments about job creation and about the problems of the economy, when their industry caused it?
HARLOW: It is a very good point. They take responsibility for the crisis. I really pressed Dick Parsons hard on asking him what is Citi, in particular, a massive global bank that is partly still owned by the U.S. government, what is it doing to actually change its ways? And I will tell you, Citi is a bank, Richard, that has changed more than many of the banks out there. They have cut out a lot of their more risky business that now sits in Citi Holding. They are focusing on core areas he talked about.
But listen, even Dick Parsons said, banks are going to do business. It will be somewhat risky. That is how they make money. And he even did tell me in that interview that financial reform in this country even though Alan Schwartz, the former head of Bear Stearns, said it would have prevented the collapse of Bear Stearns, that was interesting. Dick Parsons, of Citigroup said, it cannot prevent another crisis because human nature changes. We don't know how that will change, and look, bankers do business to make money and serve customers. And the system will change. We hope financial reform can keep up with those changes and protect the consumers.
QUEST: When we have more time, you and I need to talk about that more, this idea of the inevitability of a financial crisis. Alan Greenspan spoke about that a few months ago.
QUEST: All right. Many thanks, Poppy. Lovely to have you. Have a good weekend. Come back to us safe and sound on Monday.
As we continue the Dow Jones, looking at the screen, down 75 points. It lost a bundle. It has had a really choppy difficult week. Patricia Wu is at the New York Stock Exchange.
And, Patricia, what I can't gauge is whether this is just mid-summer grumbles, or whether the feeling is that there is a major correction underway.
PATRICIA WU, CNN FINANCIAL CORRESPONDENT: That is a tough question, Richard. Especially when you have such light volatility, so the moves either way are more pronounced. So it is really tough to gauge. It was all about jobs. You guys were just talking about jobs. That really sent the Dow down yesterday, nearly 150 points, spooking the market.
But where is it going to go overall? Well, it is hard to tell today, because we don't have any major reports out. So there is nothing to trade on, nothing to change the markets momentum. But next week, we do have some important data coming out. We have readings on durable goods, home sales, GDP, so that should give us a better feeling, overall, for where this market is headed. But for now, I can tell you investors not feeling that optimistic.
QUEST: That jobless claim number that we'll see next Thursday, it was the 500,000 yesterday that sent everything over the cliff, somewhat. Is the feeling that the reaction has been overdone?
WU: Ah, that is another debate that has been going on. I've talked to a couple of traders on the floor and some said that it really is, because once again, it is end of summer. There is not much going on. You've got light volume. So, when you are looking for anything positive, and all you get is negative data, it is going to be a lot more pronounced.
On the other hand, I actually found a couple of bulls on the trading floor. I thought you would like to hear about that Richard. They were telling me that they think the M&A activity wasn't given enough attention. That it was completely overshadowed and it should be given more credence. That it shows that it is a positive sign that the economy is bottoming and it is getting ready to turn around. And the last time I spoke to Pimco's Muhammad Al Arien (ph), he told we are simply in the flat part of a square root recovery.
QUEST: Next week you and I need to make a bit of time to talk about that M&A activity. You are absolutely right. M&A start up, niche to begin with, but it does presage a change in mood. Patricia, have a lovely weekend, yourself, too.
WU: You, too.
QUEST: Come back to us next week safe and sound.
The European markets were a sorry sight. The traders who weren't on holiday were not inclined to do much business. France added to the downbeat mood. It has lowered its growth outlook for the year. It now stands at 2 percent. It is down half a point from its previous figure. So, not surprisingly, the CAC currant, one of the largest losers, off 1.30 percent.
The FTSE came off slightly better than most. Rumors about BG, that is the old British Gas, the energy company shot up 6 percent. A newspaper said Shell was considering a bid of more than $80 billion. I will believe that when I see it. There is absolutely no confirmation. Analysts are dismissing the story. I told you so.
With combat troops just about gone the oil industry wants to bring a different kind of force to Iraq, a workforce, one with oil expertise. On where they have got to in returning Iraq to a major oil producing country, after the break.
QUEST: The energy industry in Iraq is wondering what the future holds for the country. As the last U.S. combat troops prepare to pull out, fuel pipelines are a favorite target of the insurgents. Refineries and oil ministry officials also require special security. And as our correspondent, Jim Boulden now tells us, these aren't the only problems.
JIM BOULDEN, CNN FINANCIAL CORRESPONDENT (voice over): Despite all the promise, despite all the effort, Iraq oil production stands around 2.5 million barrels a day. Just where it stood before the Iraq war started seven years ago. And Iraq is still several years away from increasing production to levels some predicted it would reach by now.
MANDUCHEHR TAKIN, CENTRE FOR GLOBAL ENERGY STUDIES: Unfortunately, this didn't happen, this optimistic view that many people had, I myself. It did not occur, as you know, that there were security situations and for many years we had problems of actually bringing in and starting work.
BOULDEN: On paper, Iraq plans call for production to hit above 12 million barrels a day, which would make Iraq the next Saudi Arabia.
SAM CISZUK, IHS GLOBAL INSIGHT: It is quite unrealistic. I think if they make half of that in 10 year's time, they should be very proud of their achievement. Because we actually talk about one of their largest planned production expansions, probably in all history.
BOULDEN: To ramp up its production Iraq struck service agreements last year, with energy majors like BP, ExxonMobil, Petronas, CNPC and Lukoil. The contracts are structured to give oil companies a better return the quicker production increases. Still the majority of the revenue from these proven oil reserves will go to the Iraqi state. But next up, exploration deals in areas where no one knows how much more oil there is.
CISZUK: Many of the companies agreed to go into the oil contracts we saw awarded last year, quite tied to terms are, of course, really have an eye to sort of seeing this as a foot through the door and then, potentially going to exploration and finding their own oil at a little bit better term.
BOULDEN: What are the challenges? Well, beyond the occasional attacks on the infrastructure, new oil legislation to modernize the country's sector is still stuck in parliament. While the shear amount of goods and expert personnel needed to ramp up production is getting stuck in red tape, or in small ports, or over poor roads.
If you look at the infrastructure requirements and other accessories, which have to go to the oil fields, in order to go, from 2.5 to 12.5, to bring 10 million barrels per day of capacity, is a huge industrial undertaking.
BOULDEN: Billions of dollars of oil revenue and natural gas for the country's crippled electricity infrastructure. All tangible benefits, one day, of Iraq's energy potential. But not, it seems, for a few more years to come. Jim Boulden, CNN, London.
QUEST: I a moment, Argentina is taking action against the country's biggest media company. The latest on that. Accusations of bias flying and accusations of totalitarianism. We'll talk about it in a moment.
QUEST: Hello. I'm Richard Quest, QUEST MEANS BUSINESS, this is CNN. And here the news comes first.
QUEST: So to our main story tonight. South Africa's government is talking to its public sector unions and trying to put an end to a seriously damaging strike.
Joining me now, Richard Baloyi, the public service minister who has been involved with these talks.
He joins me now from Johannesburg.
Minister, can you tell us tonight, are you making progress and have you made progress in these talks?
MINISTER RICHARD BALOYI, SOUTH AFRICAN PUBLIC SERVICES MINISTER: Well, we continue to engage the leaders of the unions to find a solution. We came out with -- after a lengthy period, of course, of negotiations, we reached a point where we then said the government, this is where we -- we go to look at 7 percent salary increment and address the...
BALOYI: -- the issue of housing allowance up to (INAUDIBLE). The issue now is that we continue to engage. We find our offer on the table following the bargaining process regulations in -- in our country.
And the offer is on the table for the unions to come on board. I'm meeting the leaders of unions. Even today, I met two federations to actually address that. So that will take the process forward.
QUEST: Taking the process forward. But if I understand you tonight, there's no progress.
BALOYI: Well, as we are speaking, of course, it's true. There is no progress if -- if we look at progress in terms of the unions having to sign. But according to the constitution of the collective bargaining structures in the country, once the government or the employer has placed an offer on the table, the offer is there, available for a period of...
BALOYI: -- 31 days for unions to come on board. So what we are dealing with now is to make sure that we're -- we're removed from the legitimate process of (INAUDIBLE)...
BALOYI: -- and we remove the element of -- of violence and intimidation.
QUEST: Is the government prepared to sit this one out and basically see the union all the way through this strike?
Because at the moment, you're saying seven, they want eight. There's housing conditions. There's other issues.
But if the strike goes on, are you committed to actually facing them down?
BALOYI: No, we -- we are committed. We are committed to address these matters. Say, for instance, in the issue -- in the area of housing, we are looking at coming with alternative housing schemes to address the question of home ownership. We invited the unions to an engagement that, looking at the second phase, which is looming at October, because what we are dealing with at the moment -- and what we are dealing with at the moment is to look at the -- the one term increment. That is the issue of 12 months.
QUEST: but Minister...
BALOYI: -- once we're dealing with the other unions then...
QUEST: But Minister, so...
QUEST: -- to understand your position, though, the damaging effect to the South African economy is going to be quite great the longer this strike continues.
BALOYI: Of course, you are right. That's why we are waiting hard to make sure. And we are calling for the leaders of the trade unions to actually address these issues. We -- if I may put some sort of clarity, we actually set up teams, working together with the unions, to address this matter. They know very well that it's for both parties trying to finalize an engagement, which we agree that we need to exclude that from this current agreement.
So it's quite clear, it's true that we are close. But, really, what is unfair is these issues where you find a hard line for which, even in areas where a government will then say let's address these things going forward.
QUEST: Minister, many thanks, indeed.
It's a Friday evening. I know you've got a busy weekend with negotiations.
We thank you for taking time to come and talk to us.
Minister Baloyi joining me from Johannesburg.
Argentina's biggest media company has learned the consequences of displeasing the government in Buenos Aires. It got a major part of its business closed down. Now a million Web users must find a new Internet service provider.
Luis Carlos Velez is joining me now to discuss this.
Look, it's an interesting and difficult story, but how much of this is simply high-handed actions by the government and how much of it is the company doing something wrong?
LUIS CARLOS VELEZ: It is very interesting, Richard. I don't know if you see this.
Do you see this?
Do you know what I'm holding in my hands?
This is a cable. A cable for computers. And this is a scissors. This is what the government is doing to this company. The Argentinean government shut down the biggest Internet service provider in the country. The central administration claims that Liberte merged illegally with Cablevision, another service provider. Grupo Clarin, owner of Liberte, called the measure as illegal and arbitrary.
The move is the latest in a fight between Grupo Clarin and President Cristina Fernandez de Kirchner, who says the media conglomerate coverage of her administration is biased. Analysts say the consumer is the most affected in this last confrontation of powers.
The reason for this is the current Internet market share in Argentina. Richard, let's have a look at how the market is dividend in Argentina. Now, you have the numbers in the screen.
Fibertel has 1.5 million clients. Speedy has 1.4 million clients. And Telecom has 1.3.
According to what was announced today, current subscribers of Fibertel have 90 days to subscribe to another company. As you see, the competition is fierce. So, paradoxically, if the government is trying to avoid monopoly by closing one of the biggest players, it will just generate more concentration in the market. But the Internet nobel (ph) in Argentina doesn't end here. Just minutes after the government announced Fibertel's closing, DirecTV -- DirecTV said it plans to invest $46 million in Argentina to improve its satellite TV services -- and guess what -- start offering Internet access -- Richard.
QUEST: Fascinating stuff. And best of all, of course, with this, the competition has absolutely no incentive to stand up for the rights of the aggrieved.
Many thanks -- yes, many thanks, indeed, for joining us.
All this week, we've already followed the British school leavers through the ritual of getting their exam grades. Tonight, across the Atlantic, a younger age group -- students going back to school and the retailers being kept afloat, in a moment.
QUEST: The back to school shopping season will soon be in full swing in the United States. Usually at this time of the year, clothes, books, backpacks keep the tills ringing. In today's economic climate, retailers may have to try harder to pull in the shoppers.
Maggie Lake is in New York with the story -- Maggie, before you tell us about the story, I need to ask, conflict of interest, how old are your little ones and whether you are going to be shopping for them.
MAGGIE LAKE, CNN CORRESPONDENT: I just bought a backpack today, as a matter of fact. They're -- they're small. We're talking preschool. But still, you know, they need the essentials.
LAKE: And that's really what it's all about and that's why this is such a big season. It seems a bit odd to talk about it. But kids clothes are the last things that parents want to scrimp on, even in really tough economic times.
So we took a trip to the iconic New York City shoe store, Harry's, to see how the season is shaping up, because it's going to be important for retailers.
It turns out parents are buying, but many are waiting until the last minute and only buying the necessities.
UNIDENTIFIED MALE: We've got all our Uggs. We've got all our Gap (ph) sneakers. Claretie (ph). We're ready for back to school.
IVAN CASTRO, MANAGER, HARRY'S SHOES: Oh, back to school is very important for any retailer. It's really the bulk of your -- your years.
UNIDENTIFIED FEMALE: Do you like shopping?
UNIDENTIFIED CHILD: Yes.
UNIDENTIFIED FEMALE: You do.
Do you like shopping?
UNIDENTIFIED CHILD: Yes.
UNIDENTIFIED FEMALE: Oh, yes, I know.
UNIDENTIFIED CHILD: I love it.
UNIDENTIFIED FEMALE: Oh, you love it. Yes.
CASTRO: Yes, I'm pretty comfortable we're going to finish it out on an even keel. You know, am I going to tell you that we're going to jump to 90 percentage points or so many dollars?
I don't think anyone is saying that at this stage of the game.
UNIDENTIFIED FEMALE: Well, the shoe budget is kind of like -- it's kind of a little bit where we look at multiple pairs. But, yes, the budget is definitely the sales -- wherever the sales are.
UNIDENTIFIED CHILD: Plus, I like these. Please.
UNIDENTIFIED FEMALE: Well, he needs proper shoes and he needs school shoes to fit.
UNIDENTIFIED FEMALE: All right. He should be wearing at least a two- and-a-half.
UNIDENTIFIED FEMALE: Well, that's not where you're cutting down, on shoes. And (INAUDIBLE) but he doesn't need, because normally he has like seven pairs of shoes at one time and now I'm just getting three. And that's all he's getting. You know, you can go overboard with children sometimes.
CASTRO: So what you're losing, in essence, is -- is the multiple sale, because now they'll want -- instead of buying three shoes and, you know, like a play shoe and a water shoe and a dress shoe, you know, they're -- they might cut back on the dress shoe.
UNIDENTIFIED FEMALE: Last year, I spent a lot more on shoes. This year, we're cutting back. It seems like everything costs more. And our feet are getting bigger.
UNIDENTIFIED FEMALE: Altogether, two uniforms and other things, these shoes and all, it will be $1,000 -- $1,000 for two girls. And for me, it's just incredible. We just can't buy everything we like.
(END VIDEO TAPE)
LAKE: I love the little kid yawning while we were talking to him. I mean you just can't make that up. Let me tell you, that's what it's like shopping with kids. It's not pretty. But they really are, they're looking for the discounts. It's going to be tough.
And this is big business. More than $20 billion is going to be spent on back to school clothing and supplies. Parents will be out spending.
And the question is are those retailers going to have to discount so heavily to get them through their doors that it's going to hurt the bottom line and can those ars -- sales targets, Richard, measure up.
It's going to be tough, I think.
QUEST: Maggie, many thanks, indeed.
Have a good weekend.
LAKE: You, too.
QUEST: Come back to us on Monday.
Many thanks, indeed.
Maggie was just alluding to me a moment or two ago that she's taking her little ones to the Jersey Shore and the beach.
Guillermo, I suspect she may have some nice weather on the Jersey shore in the Northeastern United States...
GUILLERMO ARDUINO, CNN METEOROLOGIST: Yes, probably.
QUEST: And I'm hoping we've got a bit of that on this side of the Atlantic, too.
ARDUINO: Well, Sunday and Monday I think you get it. Now, it's extremely hot in Pakistan...
QUEST: Oh, oh.
ARDUINO: Sunday and Monday, come on. Work on Saturday and then take Monday off. We'll miss you, but you're going to enjoy the nice weather.
QUEST: Keep going. Keep going.
Back to Pakistan. You know, we're looking at the temps in here, because they are extremely hot again. We're talking about like 125 Fahrenheit in Faisalabad. And that's what we've seen on -- on Thursday. Now, those -- that heat index, of course. But those temperatures will continue. The deadly combination is those floods we have all along the Indus River. That's why we will continue to look now at the heat when the rain is not that severe anymore, especially in the northern sections.
Now, Spain beautiful. We should suggest that Richard go to the Balearics.
It's clearing now. Now, it's clearing a little bit in Britain, I would say, but especially here in Wales and into the northwest is where we will see intense rains, because we will see severe weather expert. You see the chance of tornadoes, as well.
The northern parts of Italy and also Switzerland, the Alpine Region, will be bad weather. This is the low, Richard. It's going to be there for a while -- back to you.
QUEST: Yes, thank you very much.
Have a nice weekend.
ARDUINO: Good night.
QUEST: He said through gritted teeth.
And that's QUEST MEANS BUSINESS.
I'm Richard Quest in London.
Whatever you're up to this weekend, as always, I hope it's profitable.
Come back to me on Monday.
"MARKETPLACE MIDDLE EAST" starts now.