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QUEST MEANS BUSINESS

QMB's In-Depth Look At Ireland's Debt Crisis, Scrutiny Of Accounts, Corporate Tax Debate, And Stemming Contagion Concerns; Heinz Earnings; African-Inspired Fashion; Face Time with A Black South African Businessman

Aired November 19, 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: After the best deal on offer, Ireland's prime minister tells CNN he's in talks.

Looking over their shoulders, Portugal and Spain insist, we are not next.

Tonight it is a special look at the economic crisis in Ireland, and the Euro Zone.

I'm Richard Quest. It's Friday and I still mean business.

Good evening.

The Taoiseach, the Irish prime minister, says that a bailout deal on the table, but it is now a matter of getting the best terms for Ireland. Of course, he didn't use the phrase bailout. That is still a word not being used by the Irish government. Banking officials from the IMF and the EU are going through the books tonight. They are seeking to find out how much money it would take to fix Ireland's broken banking system. CNN's Jim Boulden has been in Ireland all week. And Jim joins me now from Dublin.

Good evening.

JIM BOULDEN, CNN FINANCIAL CORRESPONDENT: Good evening, Richard.

Yes, it has been an extraordinary week, really, here in Dublin. First it was with-there seem to be denials that Ireland would actually take or need any money for the banks. Then it was discussions about the IMF coming here and going through the books.

And now it seems that Ireland will, in fact, be taking that money. The question really is what restrictions will be on the Irish economy. What penalties, what pain might Ireland have to go through to get that money. Now today, at Terminal 2, brand new terminal opening at the Dublin airport. I spoke to the prime minister of Ireland, Brian Cowen. He was talking about how this was the symbol of the new Ireland, how it will be there for when the Irish economy comes back. But I spoke to him about this whole mess, dealing with the Irish banks.

(BEGIN VIDEOTAPE)

BRIAN COWEN, PRIME MINISTER OF IRELAND: As I've been saying, I mean, the treaty provisions and treaty are quite clear on that. That is a national competence. So, at the moment we're having discussions. See were we to apply for the facility what would be the shape (ph) and package on that.

BOULDEN: There will be strings attached. You don't think that will be one of the strings attached, one of the penalties Ireland will have to suffer, raising the corporate tax rates.

COWEN: As I've said, these are-the whole question of our taxation policy is a matter for national government.

BOULDEN: How did yesterday go? How would you describe the talks?

COWEN: Very open and constructive, and a very good relationship, which it always has been.

BOULDEN: And how much longer to think these negotiations will go on?

COWEN: I can't predict the outcome.

BOULDEN: Days, weeks?

COWEN: But are (UNINTELLIGIBLE) discussions. And I think, let's let them get on with the work-

BOULDEN: Will Ireland suffer another austerity package from the IMF, then?

COWEN: As I've made it very clear, I think it has been made clear by our own governor that a lot of our work and the four-year plans has met with a lot of support of the EU and these other levels as well.

(END VIDEOTAPE)

BOULDEN: So, Richard, still no word-no use of the word, "bailout", of course, coming from the prime minister, but as he said they are not sure how long this process will take. Some people think it will be another week until we know exactly what the Irish banks will need, and Ireland, of course, will have to decide what to do next.

QUEST: As they face the weekend in Ireland tonight, is there a downbeat feel to the whole thing? A feeling-I was looking at some of the editorials from the Irish newspapers. A feeling of failure, a feeling we had it all and we've thrown it all way.

BOULDEN: Some people-one of the newspapers said it was a "dependence" instead of independence for Ireland. The finance minster yesterday had to say this was not a humiliation that the IMF was here. A lot of people I've spoken to, Richard, have basically said, look, it is not great that the IMF is here. But they are here, so therefore, let's take advantage of the situation, let's get the banks rebuilt, if we can.

And let's move forward. Maybe this will be rock bottom, maybe this will be the worst it gets for the Irish economy and for Ireland itself. And then maybe they can rebuild. But there is not doubt people feel very upset about this that it has gotten to the point where the IMF has had to come into the streets of Dublin to look over the books and decide the future of this country and for the future of this economy.

QUEST: Jim Boulden, who is in Dublin tonight for QUEST MEANS BUSINESS.

The Irish government is digging its heels in over the question of corporation tax. It is one of the key sticking points in these negotiations. Now, Ireland's rate of corporation tax has been there for years and it is a nice attractive 12.5 percent. It lures in big, international investors like Google and Pfizer. Ireland's neighbors in the EU want that rate to be raised to bring in much needed revenue. They basically say the argument, you need money, you have an unrealistic rate of corporation tax. QED, raise the rate. Because the U.K. is 28 percent, Germany is 29.5, and France is 33.3. So you can see why they are rather envious of Ireland's fiscal charms.

If you move on, you can get to see what the real problems are though, with other corporation taxes. Greece, 24 percent, Portugal, 25 percent, Spain, 30 percent, Italy 31 percent, so overall, even the peripheral countries are charging more than Ireland as their rate of corporation tax. Ireland, of course, sticking hard and fast to the idea it will not raise corporation tax.

Should they raise them. Vanessa Rossi is a senior research fellow at international economics think tank, Chatham House.

Good evening.

VANESSA ROSSI, SR. RESEARCH FELLOW, CHATHAM HOUSE: Good evening, Richard.

QUEST: You knew we'd be back at here again, didn't you?

ROSSI: I think we knew it. But what about that corporation tax?

QUEST: Should-I mean, they say that their corporation tax policy is a backbone of sovereignty and of economic success.

ROSSI: Firstly we have to remember those numbers look at tax rates. It makes it look as if Ireland is very much out of line with everybody else. The reality is that in many of these countries there are so many tax breaks for companies that the effective tax paid is much lower than the figures you've shown.

QUEST: You are defending Ireland here?

ROSSI: In this case, the Irish low tax isn't as low as it appears. More importantly-

QUEST: It's symbolic, though.

ROSSI: Yes, but more importantly, if the Irish problem is that it has got to raise revenues to help pay back these debts. What is actually the most significant revenue raiser? You don't raise a lot from corporate taxes. So in terms of this being a serious measure, to bail out the country, to pay back the loans, this is not really what this corporate tax issue is about. This is about the opportunistic-

QUEST: Oh!

ROSSI: Where others countries are wanting to change Ireland's policy, because they think they can get a bit of advantage out of it.

QUEST: OK. So-but at the moment it seems as any bailout cash the Irish government is merely going to be the transmission mechanism to Ireland's banks.

ROSSI: This is what seems to be happening. It is not the government that has run bad policy. Unlike Greece, Ireland has got to this problem while it has run good public finances for years. Suddenly you find it has a problem with property markets that are too big for it, some 300,000 houses that can't be sold in Ireland, then the banks have a problem. All this problem stems from the too big property, too big banks.

QUEST: Which the government allowed to take place. They could see the bubble growing.

ROSSI: And the people did, and the people did. They also liked the new houses, as they came along. Ordinary people speculated in the housing market. So it isn't simply a nasty bank problem, or a nasty IMF problem. But you now have to bailout this situation in order to rescue both your own economy and of course financial systems across Europe.

QUEST: So let's just talk about that. Coming up next, obviously, Portugal and Spain, neither country says they are in a very bad situation. But the market doesn't really care does it?

ROSSI: Well, I think there are some differences here. Certainly at the moment there has been noises about Portuguese banks needing more money. If that were to come out-

QUEST: But with sovereign debt questions?

ROSSI: Sovereign debt is already high. There is a lot of external debt. So if the external investors pull the plug then any of these countries are vulnerable.

QUEST: All right. Face to face now, does Portugal get it next?

ROSSI: It is going to need a lot of friends if it is going to avoid a bailout situation. But the point with the bailout is it may be a better route to go. That may be the crucial point. At some point of where markets are pushing interest rates higher, it is actually better to take the queen's shilling, i.e., the IMF's shilling. Go for it.

QUEST: All right. I'm going to have another go at this one. I'm going to try this question again, in another way.

(LAUGHTER)

QUEST: Will you and I be sitting here in a couple of weeks talking about this again?

ROSSI: Oh, I'm sure we will. Quite what it will be that starts it off, we'll have to see.

(DESK BELL CHIMES)

QUEST: Have a good weekend.

ROSSI: As you.

QUEST: Now we've got lots more to talk about on Ireland tonight and the rest of the Euro Zone, as we have just been discussing. If the Celtic Tiger is sneezing, other countries in Europe are well and truly putting on their winter woolies, ready for what might come. In a moment.

(COMMERCIAL BREAK)

QUEST: Tonight the troika is driving through Ireland's financial accounts. There are officials from the European Union, the European Central Bank, and the International Monetary Fund. And they are in the Irish capital. These three workhorses are there to square up the books and to see whether a liberal dose of cash and a strict letter on good housekeeping might actually be what is called for. But it is not easy.

Come and join me in the library and you will see what I'm talking about. The three in the troika: Let's start with the European Union. Now, the EU and the members of the EU picked up the lion's share of the $146 billion for Greece, for the bailout there. They are also the main backers of the European Stability Facility (sic), which of course would be the money-of course, Greece has got one on its own. But it would be the European Stability Facility-Fund , that would be used to for Ireland, or anybody else.

Germany, of course, has made up the biggest contribution within this area. Now, these people, the European Central Bank, are the mechanism by which a lot of banks have been surviving so far. It is estimated-you'll know, of course, that the ECB is providing unlimited liquidity on a several months-three months area, or three month's period. Trichet, the president of the ECB, Jean-Claude Trichet, says the crisis funds are limited and can't continue forever.

Now here's a figure for you. Irish banks, which can't borrow in the outer market, are raising their money from the ECB. Up to 25 percent of all emergency funding from the ECB is going to-Ireland. So they say.

The IMF was brought in to make up the numbers. They are going through their books. The general feeling was, when the funds were set up, there really is only one organization that is able to sort this lot out and get to the bottom of it and that is probably the Washington-based IMF, funds.

So, with Ireland on the ropes and considering a bailout, other countries in the Euro Zone periphery are wondering if they will be next. And there are two main countries that we need to look at tonight. And you'll be familiar with them, Spain and Portugal.

Spain, is much larger, and it is more significant economy than Ireland's by a large measure. The finance minister insists comparisons with Ireland and Greece aren't accurate. In Portugal, however, they are really in the firing line. Because many analysts there predict they are next, even though their economic position is better than Ireland.

The bond market doesn't necessarily agree. High yields makes it difficult. So, let's talk about these. Barack Obama is in Lisbon for the NATO summit. And the president has said Portugal has its full support.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Portugal is working through challenges created by some of the financial markets and I think that it is important to note that the prime minister has committed himself to a very vigorous package of economic steps. And we are going to be working with all of Europe, as well as Portugal, in support of these efforts and we want to say how much we appreciate some of the work that you are doing.

(END VIDEO CLIP)

QUEST: So, Barack Obama giving his support, and yet Portugal could be the next vulture's destination, once they stopped circling over Ireland. CNN's Isa Soares joins me now from Lisbon.

Isa, let's start. How worried are they, really, in Portugal, that they are next?

ISA SOARES, CNN INTERNATIONAL CORRESPONDENT: Well, Richard, the situation here is grim. And people are really terrified. They are worried about the measures put in place by the socialist government. They believe they've gone too far. And they are worried about what that will mean for them and for their family. But it is also, you will also see a lot of this next week, Richard, when two our largest trade unions will go on strike, on the 24th of November. And they are really protesting a cut in wages and rising taxes.

And just to put it into context for you, Richard. These are the two biggest trade unions in Portugal and the last time they enjoined forces was 20 years ago. But people are also angry for a completely different reason. A lot of the economists and the financial experts I have been speaking to here saying that Portugal is really taking a huge hit and the financial markets are not being very lenient. They feel that Portugal should not be pigeon-holed alongside Greece, and alongside Ireland.

QUEST: Ah, but you see, that is an interesting point.

SOARES: Richard.

QUEST: Yes, that is an interesting point, Isa, isn't it. Because the economic position, the government keeps saying, and the ministers keep saying that the economic position is very different to these other countries. But, Isa, nobody is listening.

SOARES: Well, Richard, it is very different. Their argument is that, you know, in Greece there was fiscal problems, credibility, and in Ireland it is related to the banks, and the bubble that just burst, housing bubble that has burst. But the reality is as we all know, Richard, is that we have got high unemployment, 10 percent; like you said, not as high as Spain, huge government debt. And you know the growth, there is not growth whatsoever. And if Lisbon really doesn't get its act together and really grow in the next couple of months, the next quarter, then really it is going to have trouble competing in the euro, in the European Union.

QUEST: Isa Soares, on the competitive question of the euro. Many thanks, indeed, joining us from Lisbon tonight.

So, the picture across the border, in Spain, should be looking better. But, frankly, tonight, some would say is every bit as bleak. Spain has the worst unemployment numbers. The third largest deficit in Europe. I was joined by our Madrid bureau chief Al Goodman a short while ago, and I asked, well, the same question as I asked Isa, would Spain also fall?

(BEGIN VIDEOTAPE)

AL GOODMAN, MADRID BUREAU CHIEF: You know the Spanish finance minister has said that Spain is not pressuring Ireland to take this bailout, but Spain clearly is worried about what might happen in Ireland and they are worried that if Ireland becomes more unstable, that could spread to Spain's neighbor, Portugal, right next door and if Portugal becomes more unstable then the word across Europe is that Spain would be next. So, yes, there is concern about that.

Now Spain has been hammering away that they have been saying for months now that they are Greece or Portugal. Lately they have been saying they are not Greece, nor Portugal, nor Ireland, Richard.

QUEST: And as we look at, for example, the government of Prime Minister Zapatero, he had a certain difficulty keeping it all together to get his austerity package through. But the question is whether he can get the next round of that through?

GOODMAN: You know there are so many rounds this is what the analysts say here. Even this day the cabinet passed yet another round of measures that basically promises there will be either decrees or laws early next year to further implement the austerity measures.

The prime minister, and this was seen in parliament this week, is breathing easier. Because he has got a couple of smaller parties that have said that they will help him guarantee to get his 2011 budget on through. And that will take him up to the time of the elections which are due by the spring of 2012.

So he's breathing easier now and the hammering away by the conservative opposition, "you must call and elections now, you must call elections now", that is fading away. What the problem in Spain is the growth is very tepid. You've seen the numbers, Richard, it is basically flat. It might grow just a couple tenths of a percent this year. The labor minister says Spain needs 2 percent growth in order to create jobs. And next year the growth outlook by Spain and others is maybe 1 percent and a little. So, things are moving very, very slowly. There is no quick exit here.

(END VIDEOTAPE)

QUEST: That's Al Goodman joining me from Madrid. In all of this the credibility of the euro could be crucial in keeping the Euro Zone from suffering worse measures. And one question has been raised persistently this week. Why has the euro not gone down further against the U.S. dollar, bearing in mind what's happened to Ireland? Take this graph over the last- now if you look at the fall of the euro against the dollar. It was about 18 to 20 percent during the Greek financial crisis. It was a very sharp- that was the low point down there.

Over here, of course, we are now just starting to see the Irish contagion effect. But it is in single digits. It really has been no dramatic response yet. So although things have been fairly bad before, this time around the euro seems to be holding its own. Which, of course, raises the question why this should be? Now it is only until the last month or so that it is stuttering again. Right now the euro buys a $1.36. Down 8 percent from over the year.

Earlier I spoke to David Bloom, the head of global foreign exchange strategy at HSBC. I asked him why the euro had managed to avoid a complete collapse?

(BEGIN VIDEOTAPE)

DAVID BLOOM, GLOBAL HEAD OF FOREX STRATEGY, HSBC: I think the euro hasn't fallen out of bed because there is now a mechanism to resolve some of the problems. Earlier this year, with Greece, there was nothing. There was no mechanism. There was no way out of the problem. Here we have something. There is a big fund. We know they can put the money forward for Ireland. And so the mechanism is in place and this has been very, very helpful.

QUEST: But, for instance, that doesn't, for example, explain why yields on Greek debt are now over 11 percent again, when there is a mechanism in place and Greece is the last country that now has got to go to the markets. So why isn't Greek debt under control?

BLOOM: Well, the whole situation is we are suddenly seeing the different premiums for different sovereigns with in Europe, where they had all converged to the same level. So that is a healthy aspect of what's happened. But yes, there is different risks for some of them. And some people think there might be a restructuring out there. And if there is, that is no bailout it is a restructuring. And even today, we are sitting here in the market waiting, with baited breath, is there a restructuring or is there a bailout? Which one is it? And we are sitting here quite nervously awaiting to see the answer. Perhaps we'll get it this weekend.

QUEST: What is the difference between a restructuring and a bailout? The two tend to go together. You have the bailout, which then leads to the restructuring?

BLOOM: No, I think a bailout comes from different sovereigns, but it means you don't target the next country. If you get a restructuring, the big fear is, oh, Ireland's had a restructuring, who is next? Let's go over to the next one. Oh, is it Portugal? Is it Spain? And you get this domino type effect. And what they are trying to do is halt the problem here and now. Now, I know what you are going to say, is they tried to do that with Greece. They haven't managed and here we are with Ireland. But you at least try your best to try and stop some kind of domino influence taking hold.

QUEST: But, but-there's been no restructuring in Greece yet? It doesn't look like at the moment there will be-

BLOOM: No, there was a bailout.

QUEST: I'm sorry?

BLOOM: There was a bailout in Greece, that is why there was no restructuring. This is why the market is debating are we going to go through another bailout? Or is this now going to be a restructuring of debt? Now this has severe implications for different markets where there is a bailout or restructuring.

QUEST: As we look next to Portugal, do you believe the market is about to launch the next salvo in that direction?

BLOOM: No, because I think a bailout is probably more likely and that would at least hold things for the moment. And hopefully things will get better from here. But we'll have to wait and see. Where the restructuring I think would automatically trigger looking for the next victim.

QUEST: The countries of Spain and Italy and Portugal, they have their problem but they're not basket cases.

BLOOM: Absolutely. I mean, don't we all have our problems, let's face it. Yeah, so they have problems, but again, you know, there is tourism in Spain. There is different sectors in Ireland. And what is so interesting about Ireland is are they going to force this corporation tax? Are we moving to a single fiscal authority in Europe, where the rest of the Europeans say, right, you want some money, we are going to change your tax regime. Therefore, are we moving in Europe to single fiscal authority and that means a completely new euro and actually over time a strengthened harder euro?

(END VIDEOTAPE)

QUEST: David Bloom with the difference between rescheduling and bailouts. It may be a nuanced difference, but important nonetheless.

In a moment we'll take a look at the painful reminder of Ireland economic downturn. The ghost towns scattered throughout the country.

(COMMERCIAL BREAK)

QUEST: It is a classic case of boom to bust, property was at the heart of Ireland's economic miracle. But it has also been a barometer of the country's slide into recession. Boosted by rapid economic growth and fueled by ridiculously cheap loans from the banks. House prices almost quadrupled between 1997 and '07. Since then they have plummeted by some 30-odd percent. The collapse means that many developers have abandoned projects before they are even completed. The so-called ghost towns as Carol Jordan now reports.

(BEGIN VIDEOTAPE)

CAROL JORDAN, CNN CORRESPONDENT (voice-over): But the country was brought to its knees when, finally, the building bubble burst.

This is Cian O'Callaghan. He works for NIRSA, an official body that has advised the government on the issue of ghost estates. It defines a ghost estate as developments of 10 houses or more where over half are empty or unfinished.

CIAN O'CALLAGHAN, NATIONAL INSTITUTE FOR REGIONAL & SPATIAL ANALYSIS: Actually, there's about 620 of those in the country, from our estimate, from the data we're using.

JORDAN: And there is a massive over supply of homes -- about 103,000 more houses than needed. And that's Mr. O'Callaghan in the town of Midleton in the east of County Cork. A commuter town, it has a population of just over 10,000 people. We visited three ghost estates -- a fraction of the number here.

O'CALLAGHAN: This is an estate which has, I think it has 76 houses in it. And it's all boarded off. It's all vacant. It's probably the last phase of a bigger development, you know, which stretches back and has got more occupancy in the estates further down. But as you can see, there's this whole, you know, rows here of empty houses.

JORDAN: NIRSA says that there's no doubt that developers and consumers alike over indulged during Ireland's building boom, with developers borrowing money against existing and unfinished developments from banks that were lending money freely. Homeowners bought second homes, borrowing against properties they already owned.

But NIRSA says it's what they call a catastrophic failure of the planning system, which was also responsible for allowing the building frenzy to spiral unchecked. It's a charge the Irish Planning Institute vehemently denies.

GORDON DALY, PRESIDENT, IRISH PLANNING INSTITUTE: Certainly, weaknesses in the planning system have contributed to the problem, but neither should the planning system be viewed as a scapegoat for everything on the ground.

JORDAN: Whoever is to blame, it's agreed something must be done, though what is still not clear. Although I tried to talk to some of the residents of ghost estates, none agreed to be interviewed on camera. They're facing the prospects of living in these ghost estates for the foreseeable future. Right now, none of the empty homes can be sold.

Many of these ghost estates are now in the hands of the state-run NAMA, a bank that has taken on other banks' bad debts. They will decide what to do next.

Carol Jordan, CNN, East Cork, Ireland.

(END VIDEO TAPE)

(COMMERCIAL BREAK)

QUEST: Hello, I'm Richard Quest, QUEST MEANS BUSINESS.

This is CNN and the news always comes first.

The headlines this evening, NATO leaders are holding a two day summit in Lisbon in Portugal with the war in Afghanistan at the top of the agenda. They're also discussing strategic goals and planning for an anti-missile defense system in Europe and they'll meet with the Russian President Dmitry Medvedev for the first NATO-Russian summit since 2002.

An explosion in a coal mine in New Zealand's South Island has left 27 miners missing and feared trapped. Rescuers are waiting to enter the mine until they know the shaft is clear of explosive gases. Two miners managed to scramble out after the blast and they suffered slight injuries.

We now know that that suspicious item in a laptop bag found in Namibia was a harmless test device. The owner of a U.S. security company confirmed it has his firm's sticker on it. He's told CNN the training device helped screeners identify explosive items and they're not sold to the general public. The bag apparently was to be sent on the flight to Munich.

Now, other news. Growth in emerging markets has helped Heinz -- the Heinz 50 varieties to a better than expected second quarter numbers. Net income was $351 million, up 8.6 percent. On the down side, sales slipped, dragged by what the company called frugal consumers in the U.S. and equipment. The Heinz chief exec, Bill Johnson, and I asked him

(BEGIN VIDEOTAPE)

WILLIAM JOHNSON, CEO, H.J. HEINZ: Well, generally, Richard, I was very pleased with the quarter. Earnings came in slightly better than consensus, and, frankly, better than we had originally anticipated. Sales were a bit mixed. I think what we're seeing is a continuation of what we've seen for the last couple of years, in that the developing markets are outperforming the West and the developing markets.

And so generally, I was pretty pleased. Our U.K. business was very strong. Our emerging market business was very strong. Our global ketchup business was very strong.

But there's no doubt that the consumers in the continent of Europe and the United States are being a little reluctant and are still making some trade-off decisions in their purchasing behavior.

But generally, I doesn't consider the quarter mixed. I thought it was a pretty good quarter.

QUEST: This -- this divergence now between the emerging and faster growing and the developing, how challenging -- and the developing markets - - how challenging is that?

Because if I think of my week, I've spoken now to a -- to a ketchup CEO. I've spoken to a -- an oil CEO. I've spoken to a variety of CEOS, all of whom are making the same point -- it's a bipolar world now.

JOHNSON: There's no doubt it's bifurcated. And -- and, actually, that's a good thing for us, because brands are global and our brands travel quite well. But I think there's no doubt that as we go further into the future, it's going to become even more bifurcated. The developing world is -- is consumer rich. And as the middle class emerges in those markets and prepared foods become part of a staple of their diet, there's no doubt that categories like ours and that we compete in will continue to grow.

In the developed world, it's far more competitive. The growth that you're struggling for is far lesser, unless you have some major breakthrough like we've had on dip and squeeze in ketchup.

And so I think generally, from a CPG standpoint, that is our industry, there's no doubt that to be successfully in the future, we're going to have to be successfully positioned in the emerging world.

I don't find it difficult. I find it interesting. In fact, week after next, I'm going to spend 10 days in Asia reviewing our businesses and looking at additional opportunities.

But we've been there for a while. We have people on the ground that are local. We know how to operate in those markets. It's just an evolving world, Richard, much as it evolved into the West years ago, it's now evolving into the East.

QUEST: And that -- it's a fascinating time to be doing business, isn't it, in that respect, because, I mean the -- the fundamental rules remain the same, the game remains the same, but the way in which you play it has to be slightly different. The tactics have to be different.

JOHNSON: That's exactly right. And I think the products have to be tailored and localized as much as possible while still re--- retaining the -- the quality and the vestiges of what made them successful in the West.

I think the interesting thing for us is, as we evolve, the resources for most companies in the West have been oriented toward the developed markets. And those resources are now having to be reapplied a little differently.

And I think the education process that all of us are going through in terms of how you -- you deal with the local governments and the regulatory environments and the consumer is a fascinating one of -- of learning and education. But at times, it can be rather taxing, as you're trying to shift resources out of markets that are not giving you the returns they historically have into markets where you know you're going to get great returns, but there are going to be some difficulties in those markets.

But -- but I have to tell you, I ran the Asia-Pacific for our company in the early '90s and I thought I saw then what I thought was going to be the emergence of the new consuming class. And it's exciting. I mean it's a great time to be a CEO from that regard.

QUEST: But you are -- you -- you -- you -- you do say there you are having to shift resources in that respect, because it makes common sense.

JOHNSON: That's right. I mean you fish where the fish are. And, you know, I -- I think that's one of those simple statements that says a lot in terms of its depth of understanding about where the consumers are moving to.

I think in our case, the resources you're seeing shift, we're shifting capital and capacity and marketing resources into those markets to take advantage of consumers that are early anticipating the arrival of our products and where we can get better returns for our multiple constituents, whether it be our shareholders, our employees or our customers and consumers.

And so I think you're going to see that continue to build over time. And I really do believe that global trade is the one thing that will bring us all together in the end.

(END VIDEO TAPE)

QUEST: Bill Johnson of Heinz talking to me.

We have another chief executive still to come. The Middle East with the chief executive of Doha Bank and the world seen from their portfolio.

(COMMERCIAL BREAK)

QUEST: Europe's economy undergoing convulsions with Ireland on the brink of a bailout.

We need to get the view from the Middle East, a region which is no stranger to difficulties with debt problems, especially in Dubai.

Joining me now is Raghavan Seetharaman, who is the chief executive of the fastest growing bank, one of the top performing economies, Doha Bank in Qatar.

He joins me now.

Good evening to you.

RAGHAVAN SEETHARAMAN, CEO, DOHA BANK: Thank you, Richard.

QUEST: How serious -- I mean the -- the one thing your banks have got is money -- lots of it, maybe from government funds. But Ireland tonight in terrible straits.

Would you invest in an Irish bank?

SEETHARAMAN: Well, it's -- the fiscal problems is last in Europe. It's not only Ireland. It has got a contagion impact, clearly. If you have deficit financing, one third of the GDP and your gross debt to GDP is over 100 percent, the same repeats in Greece, Portugal. And Spain is not far off. Most of the larger economies, again, the gross debt to GDP is huge. The convergence criteria has been breached. The measure mechanism has failed. So it's --

QUEST: Wait a minute --

SEETHARAMAN: And so --

QUEST: -- but it never was -- it was never going to work to start with.

SEETHARAMAN: Well, it's -- that's what -- that is not the purpose. The idea is to clear an alternate to the dollar. The dollar still goes strong and a reserve currency. It's a safe haven, even when the world was in turmoil, clearly, the dollar was becoming -- the dollar index was strong.

So today, if you have to invest, yes, it is possible. But you're looking at a yield, serious, it's a fantastic investment. At the same time, it has to be backed up by a proper guarantee. Then the sovereign funds can invest, corporates can invest in these bonds.

QUEST: Would you?

SEETHARAMAN: Of course. With this kind yield, if there is a protection -- capital protection -- why not?

(INAUDIBLE) you will get 8 or 9 percent.

QUEST: Right. But you're waiting for a bailout before you'd want to have a certain amount of stock up, but you weren't going to take a haircut or you were on those bonds at some stage in the future.

SEETHARAMAN: Absolutely. It's -- it's a profit (INAUDIBLE).

QUEST: You want a guarantee?

SEETHARAMAN: Absolutely, we need a guarantee. Not only do we work, see, we have learned lessons. You had mentioned about Gulf. Gulf economies are stronger economies, if you look at it --

QUEST: Oh --

SEETHARAMAN: Six different --

QUEST: Oh, no.

SEETHARAMAN: Six (INAUDIBLE) put together --

QUEST: No. Hang on. Hang on. Hang on. Let's not -- let's not over rank this pudding. They are strong economies, but Dubai nearly went bust.

SEETHARAMAN: Dubai is not a country. The UAE is a country, as per the United Nations charter.

QUEST: Oh --

SEETHARAMAN: -- so, you know, it --

QUEST: All right. Touche.

SEETHARAMAN: -- it runs a fiscal surplus, a (INAUDIBLE) surplus, (INAUDIBLE) surplus, sovereign funds was the (INAUDIBLE) to $600 billion.

So let's not exaggerate the Dubai problem. It has got, you know, properly overdone. But it isn't part of the overall UAE. It's limited in real scope.

QUEST: Do you think that it is a realistic goal long-term for the hydrocarbon economies to shift to other -- to other (INAUDIBLE)?

SEETHARAMAN: It's already happening. The diversification is already happening. If you look at it, 60 to 60 percent -- 62 percent is -- of the GDP is oil and gas. Countries like Qatar it's (INAUDIBLE) --

QUEST: Long-term?

SEETHARAMAN: Long-term. The vision is to converge the non-oil and gas by 2015, by the GCC's (ph) case, 50-50. Qatar is doing it. We're invested in Barclay's, Sensebury's (ph), Harrods.

QUEST: Harrods.

(LAUGHTER)

SEETHARAMAN: I mean we are putting money wherever there is an opportunity, a good return.

QUEST: How --

SEETHARAMAN: And into the Bank of China.

QUEST: And before we're finished, I'll take something (INAUDIBLE) for QUEST MEANS BUSINESS.

All right, many thanks, indeed.

We'll talk again.

Many thanks, indeed.

Come back, please.

SEETHARAMAN: Thank you.

QUEST: We are out of business tonight.

That is QUEST MEANS BUSINESS

I'm Richard Quest.

Whatever you're up to in the hours ahead, I

do hope it's profitable.

I'm off next week. Max Foster will be in this chair.

"MARKETPLACE AFRICA" is up after this short break.

(COMMERCIAL BREAK)

ROBYN CURNOW, CNN CORRESPONDENT: Hello and welcome to MARKETPLACE AFRICA.

I'm Robyn Curnow here outside Masaking (ph) in the northwest of South Africa.

This is a local roadside store selling things like biscuits and peanuts. And the reason we're at this location is because the show this week is going to focus on retail, and more specifically, rich and poor, local and expatriate African consumers.

So we begin this week with an in focus look at an online fashion boutique that sells African designs.

(voice-over): Bold colors and tribal prints from a design studio in London. Four young designers are exhibiting their work -- distinct in many ways, but what unites them is the outlet they use. They all sell their fashions on Agnes and Lola, an online fashion store which has set its sights on becoming the Web site of choices for African fashion.

XAVERIE BAKEMHE, DESIGNER: We don't have so many African online boutiques to be able to have a common selling point. And I think it would be a great idea for different designers of African background to move forward.

It's difficult to break the market. So if we're not able to break that market, then we need to come together and unite somewhere else to move forward as a unit.

HAZEL AGGREY-ORLEANS, DESIGNER: There is so much room for African fashion to be online. And I like the whole concept behind her, how she's chosen to select designers to be on her Web site. I just fell in love with her story, the story behind the -- the online boutique.

CURNOW: The online store, like many major fashion brands, traces its origins to the world's most iconic fashion capital, Paris.

LOLA REMI, CO-FOUNDER, AGNESANDLOLA.COM: The brand came about more or less last year. And I was -- it's something I had been thinking about, because I used to live in Paris. I noticed that many -- many African young people wore African prints and they didn't just wear it in the traditional sense, because I used to think it was my mother's fabrics, more or less. But then they wore it with jeans and they wore it with -- and with like just as dresses.

CURNOW: Agnes and Lola launched in August this year. It currently carries lines from six different designers, all of whom have one thing in common -- their strong ties to Africa.

NKWO ONWUKA, DESIGNER: Well, I'm from Nigeria, but I see -- I'm inspired by all of Africa, because there are so many different cultures and colors and -- and so many inspiring things. I mean when you walk through the markets there are beads and there's also the fabrics. So I find my inspiration from the whole of Africa, really.

CHRISTINE MHANDO, DESIGNER: Most of the fabrics I use are from Tanzania. And this is a fabric called the conga which is a -- it's our national cloth in Tanzania. And I use the fabrics most of the time. I mean I just create a more -- in a more modern style, a more European style, which is kind of just basically what I -- what I always wear myself, because I am African but I'm also British.

CURNOW: But for Remi, running an online fashion boutique is more than just showcasing African influenced design, it's also about giving something back to the continent that inspired her.

REMI: I like to promote designers that are also ethical. In terms of being ethical, in terms of Africa as a continent and the people that they work with. So I know many designers like Chichia Boutilam (ph) and Myoso (ph) that work in Africa work and provide fair trade, as well. They don't -- they -- they use independent artisans to help design their garments.

And then we have (INAUDIBLE) that recycle garments. So it's also being very compassionate to our environment as well. So, at the moment, it's not aimed to give a percentage of the profits to charity.

The first one that was chosen is Medicins Sans Frontiers, which is also Doctors Without Borders. And we've chosen a particular aspect of it, which Condition Criticale (ph). And that's where they focus very much on the conflict in the Congo region.

CURNOW: Agnes and Lola is the latest in a long line of Web sites hoping to capitalize on the online shopping boom. What makes it different from the others is its desire to promote an entire continent, as well as its designers.

REMI: And fashion has been a passion of mine. So I think the best way, as well, is to support other designers. They are the future of African fashion. And we've -- and I very much hope that Agnes and Lola, as well, is also very much the future of African fashion, because

I think that it's important not necessarily just to make money, but ensuring that we're also giving back in some way and we're building the continent, as well. It's not just ourselves but it's like, you know, promoting Africa in a positive way.

(END VIDEO TAPE)

CURNOW: OK, let's take a look at the business of African fashion by the numbers. Now here in South African, the clothing and textile sector has generated about $2.6 billion in sales. That sector has also contributed about 1.8 percent of overall employment.

And interestingly, MasterCard recently came out with a survey that showed that 55 percent of all Africans considered fashion and accessories as top spending priorities.

Now, coming up after the break, we speak to the man who's been billed as the father of black retail here in South Africa.

Richard Maponya speaks to us.

(BEGIN VIDEOTAPE)

CURNOW: How do you like to spend your money?

What do you spend your money on?

RICHARD MAPONYA, ENTREPRENEUR: Oh.

(LAUGHTER)

(END VIDEO TAPE)

(COMMERCIAL BREAK)

CURNOW: Welcome back to MARKETPLACE AFRICA.

Now our guest on Face Time this week is Richard Maponya.

He's best known as an entrepreneur and as a property developer who built up a business empire during the restrictions of apartheid.

He started off in the 1950s with just a small general store selling basic goods to the people of Soweto, which is a township just outside Johannesburg. These days, he's still doing business, even though he's about to turn 90. In the past few years, he opened up Maponya Mall, which is one of the largest shopping centers here in South Africa.

Now, I've chatted to him about the lessons he's learned over the decades he's been in the business.

(BEGIN VIDEOTAPE)

MAPONYA: Well, I think what made me successful is the fact that I never took no for an answer. And if you -- if I know that I was in my right to get a certain thing, I would knock at your door every day until that door opens. This is how I succeeded. I was literally, you know, a -- a -- an economic activists. I knew that I have to make a statement that a black man given a chance, he also can succeed, exactly the same way as the white person can -- can -- can -- can do.

And it -- a black man can also create jobs -- opportunities for -- for the -- for the people.

CURNOW: So becoming rich, for you, was a political statement?

MAPONYA: Well, that -- that is exactly -- it was exactly the case.

CURNOW: So when -- when did you know that you thought, hmmm, I'm successful?

I'm a rich black businessman in the middle of apartheid and I did it on my own despite the white government telling me I couldn't do this.

Did it feel good?

MAPONYA: Well, it felt very good, indeed. I became what they call a millionaire rather a long, long, long time ago, before anybody could think a black person could ever be a -- a millionaire.

CURNOW: How do you like to spend your money?

What do you spend your money on?

MAPONYA: Oh --

(LAUGHTER)

MAPONYA: -- that -- that's a difficult one.

CURNOW: I know. But you were one of the first race horse breeders -- black race horse breeders -- in this country.

MAPONYA: Yes.

CURNOW: Do you still -- do you still buy horses?

MAPONYA: Well, I do, I do, I do, but I'm now sort of toned down a bit. And when I got into racing, I found thousands and thousands of black people as panderers (ph). And I looked at this -- the situation -- and I said, I said, when the horses come to us in the winning circle, they are all shouting and they're shouting at whatever horse they've backed. And these horses all belongs to -- to white people. Then I said there's something wrong here.

CURNOW: And tell me what you called your first horse.

MAPONYA: My first horse, I named it Another Color, because I was a -- a man of another color coming into a dominantly white-owned -- white -- white crop.

CURNOW: And now tell me, when Another Color won a race?

MAPONYA: I just heard a commentator say, "Now they are turning for home. I can see Another Color on the right, making a fantastic run. Another Color hitting the front. It is now bard (ph) is shouting, Another Color winning!"

And when they said that, it was like a reward. Black people ran to the winners enclosure in thousands just to come and congratulate me.

It was a -- an exciting that I had never seen in my life.

(END VIDEO TAPE)

CURNOW: Richard Maponya there, one of South African's most prominent black entrepreneurs.

Now, he's what's trending this week.

(BEGIN VIDEOTAPE)

CURNOW (voice-over): Kenya will launch Africa's first carbon exchange to facilitate the trading of carbon credits and help tackle climate change. The market will be the first of its kind in Africa and will allow all African countries to sell their carbon credits. One carbon credit is equal to one ton of carbon dioxide. Officials hope the exchange will open up investment in renewable energy and forestry projects.

Google has launched Google Voice Search in South African. The service allows Internet users to use their voice to access Google searches on their cell phones. Google says the Voice Search represents the company's continued push into actually. Mobile in Africa is the largest single point for Web users.

(END VIDEO TAPE)

CURNOW: Well, that's it for this week's show from outside Masaking (ph) in South Africa.

I'm Robyn Curnow.

And thanks so much for watching.

If you want any more details, if you want to follow me on Twitter or e-mail us, please do go to our Web site, which is CNN.com/marketplaceafrica.

But until next week, good-bye.

END