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QUEST MEANS BUSINESS
An Uneasy Alliance; Taxing Trades; Contagious Continent; Blatter Says Sorry; Cocoa Farming in Ivory Coast; Interview with Kandeh Yumkella
Aired November 18, 2011 - 14:00:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
MAX FOSTER, CNN ANCHOR: Six miles, even bigger differences -- Germany and the U.K. fail to bury the hatchet.
An apology from the head of FIFA and a refusal to resign. Sepp Blatter says he is still fit to run world football.
And flights of fancy -- a brand new airport lies idle in Spain, a symbol of its broken economic dream.
I'm Max Foster.
This is QUEST MEANS BUSINESS.
Six miles, even bigger differences -- Germany and the U.K., as we're saying, have failed to bury their hatchet. But it was all smiles for the camera for the ECB, bailouts and Tobin taxes remain divisive issues. Angela Merkel and David Cameron will be live in Berlin in just a moment.
The crisis in Europe has been dominating our attention all week, so we've invented in a -- a political cartoonist, Andy Bunday, to helps us draw the strands together.
And you're going to be sketching throughout the show.
ANDY BUNDAY, POLITICAL CARTOONIST:
FOSTER: In about three quarters of an hour, we'll see your sketch.
What is it about the week that really grabbed you, though?
What are you trying to...
BUNDAY: Well, I think it's what you've...
FOSTER: -- portray?
BUNDAY: -- covered off. It's all been very Euro-centric. I think it -- it began with -- my interest was captured by the events in Italy, the new technocrat administration taking over the problems there. And I think, you know, it's developed today with the -- the meeting between Mr. Cameron and Mrs. Merkel. And as you say, all smiles...
FOSTER: There's loads of material for you, isn't there?
BUNDAY: All smiles, but...
FOSTER: We're going to be checking in with you. And at the end of the show, we're going to see the sketch that (INAUDIBLE).
Andy, thank you very much.
BUNDAY: Thank you.
FOSTER: Well, agreeing to disagree -- the leaders of the U.K. and Germany say they'll continue to work together. After a meeting in Berlin today, Angela Merkel and David Cameron admitted that they had failed to make headway on the question of the European financial transaction tax. That's just one of the issues that divides them at a time of crisis. They may be at odds on how to stabilize Europe's economy, but today, they both agreed that doing so is in their best interests.
Fred Pleitgen joins us now from Berlin.
I mean these are positive words in what seems to be a really unprogressive meeting.
FREDERIK PLEITGEN, CNN CORRESPONDENT: It really does seem to be a very unprogressive meeting. And I think that smiles and hatchets really does describe it very well.
The two leaders did try to stress the fact that there was unity on a lot of the positions concerning the Eurozone. Both said that they believed that the Eurozone needs to become more competitive, that a lot of the countries that are struggling right now need to become more competitive and the only way that they can do that is through fundamental political reforms.
Let's listen first to Angela Merkel.
(BEGIN VIDEO CLIP)
ANGELA MERKEL, GERMAN CHANCELLOR (through translator): I explained that we see it as crucial, now that in the Euro Area, we've violated the Stability and Growth Pact at least 60 times, ever since its inception, that we develop more of a sort of possibility of actually enforcing the rules for the European institutions so that national governments do keep, do abide by their commitments and a limited treaty change, as we repeat, for the members of the Eurozone.
(END VIDEO CLIP)
PLEITGEN: A limited treaty change is, of course, something that the Brits are now very fond of. They feel that more European integration at this point in time is not in their interests.
And the other big thing that continues to divide the two is the way to move forward with the Eurozone bailout. And, of course, one of the things that Britain has been trying to get going is more of a role of the European Central Bank. And if you recall, just a couple of weeks ago, David Cameron said that the Eurozone had to pull out a big bazooka to try and calm down international markets. He did play to that again, as well, today.
Let's listen in.
(BEGIN VIDEO CLIP)
DAVID CAMERON, BRITAIN PRIME MINISTER: My German isn't that good. I think a bazooka is a Superwaffe, am I right in -- so, no. Someone is shocking their head.
Look, the point that -- the chancellor and I would agree about, whatever you call this, is that we need to take decisive action to help stabilize the Eurozone. And that has to consist of the things that we have spoken about, decisive action on Greece and a European Financial Stability Facility that is with detail and meaning and power and punch behind it, and, also, the recapitalization of the banks.
But I very much agree with -- with what Angela has been saying, that a long-term solution to this problem also has to involve proper rules for fiscal discipline in European countries.
(END VIDEO CLIP)
PLEITGEN: And, of course, Max, there is still that big underlying problem of what many peer -- people here are calling a Europe that's moving at two speeds, where, on the other hand, you have the Eurozone countries that are now holding their own summit, that are trying to come to terms, of course, with the weakness of the euro and the crisis of the euro. And on the other hand, you have the non-Eurozone countries, of course, first and foremost, Britain, who are sort of watching this, who are very much affected by the Eurozone country -- the Eurozone crisis, but who really don't feel that they're in on the solution as much as they should be.
So if you want to sum up the meeting that Angela Merkel and David Cameron had today, you can, in fact, say, yes, they still disagree on everything that they disagreed on before, but both of them are saying well, that's not really that big an issue, we are going to continue to work on it.
So not very much came out of that meeting -- Max.
FOSTER: And, of course, earlier in the week, she had a meeting with the Irish prime minister, who's pushing for the ECB role to change. Now, President Obama talking about a firewall needed. That being interpreted as the ECB changing.
Is there any sense that Angela Merkel will change her position at any point on the ECB, because she's under so much pressure on that right now, even from the markets?
PLEITGEN: For the markets, for the Irish, as you said, from President Obama, also, of course, from the French and the Spanish, as well. There is a lot of pressure. There is absolutely, however, no indication that Angela Merkel is going to change her stance on this. She went on to a press conference yesterday where she said that she thought it was, quite frankly, illegal for any politicians to try and pressure the European Central Bank into taking on a greater role.
Of course, today, the new president of the European Central Bank also said that the ECB would not expand its role in the bailout of the Eurozone.
So at that point in time, the game that Angela Merkel is really playing is, on the other hand, she wants to make these Eurozone bailout measures big enough to try and calm down the markets. But on the other hand, she also wants to keep up the pressure on countries like Greece, like Spain and Italy to keep moving forward with those reforms.
And she does feel that if the ECB takes on a bigger role, offers up more cash to these countries, that it might induce them to calm down with those reforms and to let some of those reforms fall by the wayside, if you will.
So it is something that's a really high stakes game that she's playing, but by and large, she obviously believes that this would lead to saving the Eurozone and making it more stable -- Max.
FOSTER: Fred Pleitgen, thank you very much, indeed.
Well, a tax on transactions, financial transaction tax, is something that's been brought up time and time again in discussions about how to save the euro.
CNN's Emily Reuben has been looking at why.
EMILY REUBEN, CNN CORRESPONDENT: The proposal for a financial transaction tax, also known as a Tobin tax, is certainly appealing to some leaders in mainland Europe. And that's because The European Commission estimates that it could raise millions from the surcharge.
For instance, if it were to put a 0.1 percent levy on share and bond trading, and just a 0.01 percent tax on derivatives, the Commission estimates it could make as much as $77 billion a year.
The Commission says that this is only fair, because the financial sector has received $6.2 trillion in EU government bailouts and it's under taxed compared to other sectors.
But the tax isn't without risks. In its own report, the Commission said that there could be a slew of negatives. Traders could relocate out of Europe. Jobs could get cut and there could be some impact on market volatility.
The thing is, the tax has been done before. Let's go to Sweden, because they introduced this tax back in 1984. The government began taxing transactions at 1 percent at first, doubling it a few years later. In just six years, 50 percent of trading volume in Swedish listed shares had moved to London.
And when the tax was broadened to include fixed income, bond trading fell 85 percent and trading in fixed income derivatives fell 98 percent.
And what of revenue?
Well, revenues, which were $12 million. And that was just 5 percent of projected revenue. The tax was abolished after eight years.
However, it hasn't stopped Germany and France from supporting it.
I spoke to the German Finance Ministry today. And they told me that the tax didn't work in Sweden because it was introduced by the country on its own with a relatively small financial sector.
Germany thinks the tax will work in Europe because it will be across many countries, although they do think the tax should be lower.
However, not everyone is convinced. The British, for instance. Today, the U.K. prime minister, David Cameron, said he'd only support the tax if it's adopted globally. He's concerned that the European-wide regulation would lead to an exodus of traders from the UK.
FOSTER: Emily Reuben there.
We'll be speaking to an economist about what he makes of these developments in the Eurozone after the break.
FOSTER: Well, Europe's politicians are clearly split on whether the ECB should step in to help shore up the continent's balance sheets. But the new central bank president has warned there are risks in stretching resources too thinly, especially when you could be sourcing things out yourself.
Mario Draghi says leaders have been too slow in coming up with their own solutions and that the ECB has worked had enough to get where it is already.
He says: "Gaining credibility is a long and laborious process. Maintaining it is a permanent challenge. But losing credibility can happen quickly. History shows that regaining it has huge economic and social costs."
Well, this might just have been the week where contagion finally hit the rest of Europe.
Earlier I spoke to Alan Brown, the chief investment officer at Schroders.
I asked him for his take on the last seven days.
ALAN BROWN, CHIEF INVESTMENT OFFICER, SCHRODERS: Well, I think, you know, this has been a week when we've seen contagion spread further. It's beginning to affect the yields in other markets as -- as well. So we've seen increases in Spain and in -- in France and elsewhere. And I think that's a very, very worrying development. You know, this is -- this is where politics and economics are sort of meeting head-to-head.
And, you know, while one can perfectly well understand Germany's aspiration to keep all the members in place, not to end up picking up the bill and not to see the ECB monetizing debt by printing money, I'm -- I'm rapidly coming to the conclusion that I really don't think that all three of those objectives are attainable.
And I'm -- I believe we're getting to the point where the issue of the ECB's role and -- and we know they're reluctant to print money, as well. The issue of the ECB's role and Germany's breakfast or it is going to be absolutely key to avoid a potentially very dangerous contagion spreading.
FOSTER: How long have the ECB and Germany got, in the markets' mind, to change their minds on the role of the ECB?
When does it become too late for them?
BROWN: Well, it's -- it's almost impossible to say. Really, the in - - the circumstances we're afraid of is where markets don't just push up bond yields. That process can on for quite a long period of time before it really affects the country's funding costs.
The issue that we would be most concerned about is if you start seeing capital flight from one or more of the peripheral countries, believing that they're next in line.
And if that happens, then you walk toward or possibly move very quickly toward a full blown credit crunch. That's -- that's the Armageddon scenario that certainly frightens us.
FOSTER: We're also looking at the bank financing, as well, though, aren't we?
BROWN: Yes. Well, you -- you know, if that happens or if we see a further write-off of government debt, there may well be a need for significant amounts of additional capital for the banks, if those two events happen.
And in those circumstances, it will be interesting to see whether the private sector will deliver it or whether that would have to come through state aid or even taking banks into state ownership.
FOSTER: Just a word on Spain. Presumably, Italy and Greece are sort of cared for, for now, because those bureaucratic governments are in place, in effect.
But Spain has been swept into the -- bond yield crisis, as well, hasn't it?
Is that a Spanish problem or is it just because Spain is seen a part of that group?
BROWN: Well, I -- you know, I think the view, probably, from the ECB and from Germany would be that markets are being pretty irrational here. And, you know, there may be something to that, but we can't exactly dictate to -- to markets.
So I think the issue of contagion and politics is -- is really the one that we need to focus on here. It's not that Spain is in such a position that it shouldn't be able to get through. In fact, I'm of the view that if early action had been taken, contagion could have been avoided and the problem could have been isolated to Greece. I fear we've missed a big opportunity and it's getting more costly by the day.
FOSTER: OK, so next week, what are you looking out for?
BROWN: Ha. Well, again, I'm afraid it's a day to day story. It's impossible for me to forecast the way the politics -- political winds will blow. And -- and, really, that's the -- the driver today.
I -- you know, it's nice to get good news from company earnings. It's nice to get good economic releases. But, frankly, it's the political developments in the Eurozone which are the -- the real driver of whether we have a green day or a red day.
(END VIDEO TAPE)
FOSTER: Yes, well, meanwhile, it's an ugly day or an ugly side to the beautiful game. After downplaying racism, FIFA President Sepp Blatter says he's sorry. We'll see how the world of football is reacting to that, next.
FOSTER: The FIFA president, Sepp Blatter, has apologized for comments that have sparked a major row about racism in football. On Wednesday, the man at the top of world football told CNN that victims of racist abuse on the pitch should simply shake hands and move on.
Those comments have drawn criticism from players and politicians.
He's a reminder of what he said.
(BEGIN VIDEO CLIP)
SEPP BLATTER, FIFA PRESIDENT: There is no racism. There is maybe one of the players toward the other, he has a word or a gesture which is not the correct one. But, also, the one who is affected by that, he should say, it's a game. We are in a game. At the end of the -- the game, we shake hands. This can happen.
(END VIDEO CLIP)
FOSTER: Well, FIFA's sponsors are now getting worried. The airline Emirates is now reportedly reviewing its sponsorship of FIFA events.
In the meantime, Mr. Blatter has apologized unreservedly.
(BEGIN VIDEO CLIP)
BLATTER: I'm sorry and I regret that my statements earlier this week have resulted in an unfortunate situation and has taken this damage.
I am committed to the fight against racism and I have no doubt about that. And I want to make it very clear, I will not stop until we have stamped out of football, racism.
(END VIDEO CLIP)
FOSTER: Well, controversy is nothing new to Sepp Blatter. He's been president of FIFA for 13 years and made several enemies along the way, although he was reelected unopposed earlier this year. He faced a minor revolt when his only rival for reelection was banned for life over a bribery scandal. His critics say Blatter runs FIFA more like a fiefdom. He's answerable to the FIFA Congress, which votes on the presidency every four years. That's made up of representatives from every single nation's football association. So that's more than 200 members. And it doesn't matter how big your country is, it's one vote, one nation.
Most of them voted in favor of Blatter in June. He has, after all, overseen the most profitable period in the game's history. FIFA has now got cash reserves of more than a billion dollars. But corruption problems haven't gone away. Only last month, four Caribbean officials were suspended. Several more were disciplined after an investigation by FIFA's ethics committee.
The English Football Association has made its feelings clear on Sepp Blatter. It made a point of abstaining from the controversial vote earlier this year. And today, it's publicly welcomed his apology.
I asked its former head, David Davies, if Blatter's position was really under threat here.
DAVID DAVIES, FORMER CHIEF EXECUTIVE, ENGLISH FA: There's no doubt that he is sorry for what has happened and for the words that he has used. And it would be churlish to say otherwise after, you know, I thought that he -- he seemed very apologetic and quite humbled by what has happened in the interview that he's given today in the -- in Switzerland.
Having -- having said all that, you know, he is absolutely right, Mr. Blatter, when he says -- and it's only a few months ago -- that some 186 countries, effectively, out of around 200 that are members of FIFA, supported him not for a first term, but for a fourth term of office.
FOSTER: Where does his strength come from, though, because one imagines that a chief executive of another company would look far more vulnerable than Sepp Blatter is right now.
DAVIES: Well, he's worked out the FIFA system. And it is, indeed, democratic. The -- the power of FIFA, ultimately, is in the congress, some 200 members, as I say. And, actually, there are more smaller nations than bigger nations. And the -- there -- the evidence is that most of those smaller nations are grateful to Mr. Blatter and what his presidency has brought.
FOSTER: And I guess the sport has grown internationally under his -- his reign. So he's, arguably, had a very strong reign.
DAVIES: Well, there's no doubt that Mr. -- Mr. Blatter has been president of FIFA. And before that, people forget, he was general secretary of FIFA, as well, under Mr. Havelange.
He has presided over football at a time of extraordinary growth. And it has been a golden age. I'm -- I'm absolutely clear that people will look back on this period of football as -- as very much a golden age.
FOSTER: Do you think if someone else less politically astute was in his position they would have to fall on their sword over these comments?
DAVIES: Well, I -- my own view, as I say, is that this is -- is a storm that has erupted, not for the first time and I suspect not for the last time, in Mr. Blatter's reign on these islands of Great Britain and -- and Northern Ireland. And he survives that.
The big issue is at what point are certain of those potentially successors to him, like Michel Platini, the president of UEFA, going to say enough is enough and has the FIFA brand been damaged to such an extent that if he were to take over the crown, when he takes over the crown, it will have been tarnished?
FOSTER: Yes, we should pick up on that, because there are some brands quietly saying they are concerned, though they have said it before.
But if he -- is his position so linked to the World Cup that it would affect the sponsorship of the World Cup?
DAVIES: Well, you're talking, yes, about those sponsors who, in the past 24 hours, have been very quick to say we sponsor the World Cup. We don't sponsor FIFA. Well, that's a -- an interesting distinction. Whether it's a real one is a -- is another matter.
But I think it's an example that for their part, they are not going to pull the rug out from under Mr. Blatter.
(END VIDEO TAPE)
FOSTER: There you are, the former boss of the FA there, talking about the Blatter controversy, which rumbles on, of course.
Meanwhile, we're watching political cartoonist Andy Bunday. He's with us tonight as we draw the week to a close.
Stay with us as he sketches the top stories from the past few days.
FOSTER: Welcome back.
I'm Max Foster in London
You're watching QUEST MEANS BUSINESS.
And these are the headlines at this hour.
Syria is signaling it will accept an Arab League plan to send observers to ensure that Syria is protecting civilians. But massive protests continued on Friday in many Syrian cities, including this one, in the town of Benish. And opposition group says Syrian security forces killed at least 17 people.
Tens of thousands of people packed Cairo's Tahrir Square on Friday to voice concerns about the new constitution being defeated. The protesters are worried about a provision that would shield the Egyptian military's budget from public scrutiny.
The head of world football is refusing to step down despite a firestorm of controversy over recent comments on racism in the sport. Sepp Blatter did, however, apologize for saying there's no racism in the game. He says he should stay on in the job to help fix the problem.
And investigators have reopened the 30 -year-old Hollywood mystery of Natalie Wood's death. They say they've received new information in the case but the accidental drowning ruling will stand unless they find otherwise. Wood drowned whilst boating off Catalina Island back in 1981.
Well, Spain's favorite candidate to be prime minister says he's committed to restoring confidence in the country -- country's battered economy. Mariano Rajoy, who's expected to lead the center-right People's Party to victory in Sunday's election says the country needs a shock plan for entrepreneurs. He -- he plans to implement tax cuts for some companies in -- that hire.
And Spain doesn't have much time to deal with its debt crisis. The cost of borrowing has been flirting with the 7 percent mark, a level at which other European countries have been forced to look for bailouts.
Now, you can see the evidence of Spain's economic decay from the air. But these days, few people do. Once bustling airports built during the boom years now sit unused, unprofitable and unsightly.
Dan Rivers reports.
DAN RIVERS, CNN CORRESPONDENT: (voice-over): In the hills of Castilla-La Mancha, where Don Quixote wrestles with his fantasies, Spaniards are living with the follies of an economic delusion that has left this country in a sea of red, with an eye-watering deficit.
We're traveling along this remote highway to see an embodiment of all that's gone wrong in Spain. This fittingly used to be named after Don Quixote, until they changed it to Ciudad Real Airport. But locals simply call it "the ghost airport," because despite it being state-of-the-art, it's deserted. Commercial flights have stopped amid labor disputes and lack of demand. It's a potent symbol of Spain's problems.
Only the luxury jets of the super rich are here, with a handful of staff who aren't exactly rushed off their feet. The only thing flying while we were here was the odd bird.
(on camera): As a monument to the good times and then the bubble bursting, it doesn't get much more telling or poignant than this -- an entire airport that cost more than a billion dollars to build, now completely empty.
(voice-over): Protesters have already broken in to make their feelings clear. It's not the only vacant airport or so-called white elephant project in Spain. Election campaigns have pointed to others, evidence, critics say, of economic mismanagement and waste on a colossal scale.
Carlos Otto (ph) is a local blogger who has watched with despair as the airport was built, partly with public money, despite it barely being used.
He says the airport is the perfect example of what has happened not only here in Castilla-La Mancha, but also across Spain -- a fever to build and build. The Spanish economy relied on construction, on bricks. And this airport is a monument to waste.
Across Spain, the boom years saw rapid construction, a credit explosion and a cavalier attitude to debt. Experts say Spain is now paying the price.
STEPHEN KING, CHIEF ECONOMIST, HSBC: And Spain is caught up in this because Spain is part of a Southern European story where each of these countries has run current account deficits, it's borrowed heavily from pother parts of the world and is now having difficulty repaying.
RIVERS: Now, the economic storm clouds are gathering as Spaniards prepare to punish the socialist government for what critics call Don Quixote economics that all suddenly seem a bit deluded.
Dan Rivers, CNN, La Mancha, Spain.
(END VIDEO TAPE)
FOSTER: Let's do something a bit different today to end the week. We've been assessing the euro crisis for weeks now, of course. And we're trying to sum it up as best we can. And today, on a Friday, at the end of the show, we've brought in physical cartoonist Andy Bunday.
I mean you've been watching the ins and outs as we have, but you have to encapsulate it into one image.
So what is this?
BUNDAY: Well, I mean it starts, really, as I say, I think the backdrop for all this has been the euro crisis, the -- the troubles in Italy with, as I say, Mario Monti taking over.
And here's a...
BUNDAY: Yes, this -- that icon of -- of the precarious, the Leaning Tower of Pisa.
FOSTER: But it's actually toppling over a bit here.
BUNDAY: And it -- well, it's -- it's on the brink. And it's composed, obviously, of the euro and a -- obviously, this is Monti's rema (ph) is to try and prop up the -- the Italian economy and -- and that, in turn...
BUNDAY: Well, yes, we've got Cameron here.
BUNDAY: -- Nicolas Sarkozy and Mr....
BUNDAY: -- Zapatero, I beg your pardon, Mr. Zapatero of Spain. They are looking on somewhat alarmed...
FOSTER: He's squashed by euros.
BUNDAY: Yes, because obviously this -- this has implications there. And then here today, we had the sort of that potent conflict of England v. Germany...
BUNDAY: -- which is always...
FOSTER: (INAUDIBLE) the kips.
BUNDAY: -- always a good showdown. So -- and I thought, you know, it's been all smiles, but we know what there's some real opposition here, with Mr. Cameron still wanting his sort of big bazooka. Mrs. Merkel is very reluctant about that. She's in favor of what we call the -- the Robin Hood tax on...
BUNDAY: -- on banks here, hence the bow and arrow, the hat, the quiver. And yet they came out and it was all smiles off the pitch and a handshake. So perhaps...
FOSTER: Who's the little guy?
BUNDAY: -- Sepp Blatter would approve...
FOSTER: You got him in, as well. How funny.
BUNDAY: -- would approve of -- of that, at least.
FOSTER: Yes. So he -- he's saying everyone should shake hands at the end of all of this, which they sort of did today, actually, but they didn't agree with anything.
BUNDAY: But, of course, the problem...
BUNDAY: -- the problem, as has been pointed out to Mr. Blatter, is warm handshakes are all well and good, but there can be more fundamental problems. And this is -- this is, perhaps, what we've seen today.
FOSTER: So is it good material for you right now?
It clearly is.
BUNDAY: It just never stops. It just never stops. The antics of politicians, it's -- it's the best material there is.
FOSTER: And for you, I mean this bureaucratic movement in the south, the losing Berlusconi, for example, that's not good news, right?
He's a great character. You don't want to lose them.
BUNDAY: Well, yes. But I think -- I mean, actually, I think Mr. Monti could be quite interesting in his own way. I mean not -- I mean, you know, Silvio Berlusconi...
FOSTER: Yes, yes, yes.
BUNDAY: -- was an absolute gem, of course. And I'm -- I'm actually - - I think it's really quite worrying, because there is this whole question of well, what is happening to democracy and -- and we're in thrall of the markets and of the financial system. You know, it's interesting, the Italians are tolerating this at the moment. I think they've lost faith in their elected politicians.
But one has to wonder whether this isn't leading us down a rather dark path.
FOSTER: Yes, we'll wait and see where the tower falls, right?
BUNDAY: Well, I think he might...
BUNDAY: -- I think they're -- they'll probably keep it up for now.
FOSTER: OK, Andy, thank you very much, indeed.
FOSTER: And we'll end the show, of course, with the U.S. markets, because we haven't told you about them yet. And they've had an interesting week. Currently up just half of 1 percent though, below the 12000 mark at the end of this week.
That is QUEST MEANS BUSINESS.
Thank you so much for watching.
Richard is back on Monday.
I'm Max Foster in London.
"MARKETPLACE AFRICA" is next.
ROBYN CURNOW, HOST: You're watching MARKETPLACE AFRICA.
I'm Robyn Curnow in Central Johannesburg.
This week, we're going to take you to the Ivory Coast, the world's largest grower and exporter of cocoa. The West African country is feeding our addiction to chocolate.
But the industry took a hit earlier this year when a political crisis led to post-election violence.
Well, there's a new president now. And David McKenzie recently traveled to the country to see just how the cocoa sector is rebuilding itself.
DAVID MCKENZIE, CNN CORRESPONDENT (voice-over): Deep in the forests of Ivory Coast, where dirt roads turn to foot paths, it's where the world's chocolate comes from.
While the demand for its cocoa is high, co-op owner Toure Dramane says the price he's paid is too low. And when he looks over his latest harvest, he's anything but hopeful.
TOURE DRAMANE, COPOBAC CO-OP (through translator): The cocoa industry is very unstable. It's a mess. And I would say that it's bad.
Because the prices are not respected on the market. That's one reason.
MCKENZIE: This cocoa pod is the source of a billion dollar chocolate industry. And almost half of the world's cocoa is produced here, in the Ivory Coast.
But it's on tiny farms like this by thousands of farmers. And all of the workers we've spoken to don't even know what this produces.
UNIDENTIFIED MALE (through translator): Well, it's not our choice. It's imposed on us. We don't know what they are going to do with our product. We can't transform it. We produce it and we sell. And we get the price that's imposed on us. We can't do it any other way.
MCKENZIE: But the new government of a country that accounts for 35 percent of the world's cocoa says change is coming.
SANGAFOWA COULIBALY, IVORIAN AGRICULTURE MINISTER (through translator): From the point of view of the product itself, the profits made from the sale of cocoa have, unfortunately, not been beneficial enough to the farmers because of poor governance.
MCKENZIE (on camera): So are you hopeful now that things will progress?
COULIBALY: Things can only get better. The main reason is that today, the political crisis is behind us. The armed conflict is behind us. Ivory Coast has become a country that aspires to be stable and that inspires confidence in investors.
MCKENZIE (voice-over): Months of conflict did little to disrupt output. Ivory Coast's production reached a record 1.48 million tons last year. But years of political instability have slowed reform in an industry marred by a history of low wages and child labor.
(on camera): Everybody helps, adults, children?
UNIDENTIFIED MALE (through translator): Yes, the children who are old enough to work. While people are emptying the shells, the children can be next to their parents emptying shells, too.
MCKENZIE: Dramane says farmers in his co-op have no choice but to use child labor. Here, farmers receive around 40 percent of the price of cocoa. The government wants to see it increased to around 60 percent.
Coulibaly says newly announced government reforms will stabilize prices for growers, entirely dependent on the market.
COULIBALY: When the producer earns a given profit one year and the next year earns half of that, the fluctuation is too pronounced. It creates uncertainty for him.
DRAMANE: This is my father's first plantation. These are the oldest trees that were planted. This is where the plantation started.
MCKENZIE: Surrounded by trees planted by his father on a plantation passed down to him, Toure says he's heard these promises before.
A decade ago, it was a pledge by the world's chocolate companies to help end child labor.
DRAMANE: In 10 years, nothing has been done, nothing at all.
MCKENZIE: Now another promise by a new government. He says he still wonders if the next harvest will be any different.
David McKenzie, CNN, Delawa (ph), Ivory Coast.
(END VIDEO TAPE)
CURNOW: OK, let's take a look at some more numbers.
Now, the Ivory Coast produces around 40 percent of the world's cocoa. And the industry earns the country around $2 billion a year. Now four million people work in the Ivory Coast's cocoa industry, many of them children. And David will take a closer look at child labor in the Ivorian cocoa industry in a special Freedom Project report. Do keep an eye out for that.
When we return, I'll speak to one man who says that as Africa grows it agricultural sector, the continent could become the bread basket of the rest of the world.
CURNOW: Well, as we've just seen, the Ivory Coast is one African country whose economy is fueled by agriculture.
Now, our next guest argues that while agriculture like this is important, for Africa to grow, it needs to look beyond its natural resources.
Well, his name is Kandeh Yumkella and he's the chair of the United Nations Industrial Development Organization
And he chatted to Elise Labott.
KANDEH YUMKELLA, DIRECTOR-GENERAL, UNIDO: If you look at the interests of a number of emerging economies in the natural resources of Africa, we believe this is the time for Africa.
But the challenge is for Africa to convert that -- that opportunity they have with natural capital to invest in structural change, investing in manufacturing, investing in other growth and productive sectors of their economy.
As it is today, the share of manufacturing in GDP, it's about 9 percent.
Africa's contribution to global manufacturing, value-added, is 1.2 percent. We are marginal.
For as long as these economies do not transform and restructure and begin to add value to their natural resources, agriculture and minerals, they will remain the poorest.
And now we see an opportunity there, because, on average, in the past three years, most African economies have been growing about 4 or 5 percent in spite of the financial crisis.
ELISE LABOTT, CNN CORRESPONDENT: Where should Africa be focusing in its investment, do you think?
YUMKELLA: Africa should do a lot in investing in energy. You need a reliable cheap energy source in any economy to be able to be competitive globally. And you need investments in infrastructure.
The potential for growth, we see in agribusiness. For example, some estimate that Africa can produce up to 19 billion liters of ethanol, which is about 25 percent of global demand. That's a growth opportunity.
Africa still has 60 percent of the world's uncultivated land. So we can be the breadbasket for the rest of the world.
But in the energy front, we see initiatives now, for example, to produce energy in Northern Africa from solar to supply Europe. So when you look at the energy domain, where I spend quite a bit of my time now as chair of U.N. Energy, in that area alone, we see great potential for Africa.
LABOTT: Africa is riding a green wave. But in some ways, it's also driving the green wave, because these countries, as they're developing, they're developing with a green mentality. And as opposed to a lot of the rest of the world, which is just catching up to thinking about these green technologies.
YUMKELLA: And, in fact, that's what we want African countries to do, to begin to look at this new revolution. As you know, Lord Nicholas Stern, the climate economist, says there is all -- already an industrial revolution taking place, driven by clean energy.
But this has to be accelerated.
In the case of Africa, we can leapfrog immediately. We don't have to entirely depend on fossil fuels. We do have probably the 10 -- 10 percent of the world's oil and gas reserves.
But combined with the renewables, we can be an engine in this new revolution.
LABOTT: But what about capacity?
I mean how big are foreign companies, how big of a part are foreign companies playing in this?
YUMKELLA: There are a lot of foreign companies that have an interest. The difficulty we have is ensuring that you have a stable, predictable public policy.
Second, you need a clear energy plan. These are capital intensive investment plans. It is very difficult for a country to make a bet, in an African category, if there is not a clear plan and the assurance that policy will be stable for at least seven to 10 years.
Also, we need to deal with the issue of skills at the -- at -- in various countries, engineers and so on.
So -- but of paramount importance is stable public policy to incentivize green investments and also a little bit of a clever use of aid money. We need to use aid money, funding from World Bank and others, to de-risk investments going into infrastructure, but also into green -- green energy technologies.
LABOTT: You're also work very intensely on the resource curves. The world -- the countries with tonight most precious minerals and -- and natural resources are some of the poorest.
And -- and why aren't these countries benefiting from these rich -- richness in wealth?
YUMKELLA: Well, these countries have to be smart now. Three hundred years ago, they had -- they supplied quite a bit of natural resources to the rest of the world, some of it under colonial regimes.
Today, I think there is enough best practices around the world to see how you can use natural resources to transform your economy.
(END VIDEO TAPE)
CURNOW: Kandeh Yumkella there, the chair of the United Nations Industrial Development Organization.
Now, let's take a look at what's making business news in Africa this week.
The IMF has cut its economic growth projections for South Africa to 3 percent for this year and next. Africa's biggest economy has been hit hard by the crisis in the Eurozone, its biggest trading partner. And South African power utility, ESKOM, is making a big investment in clean energy. It signed a $250 million loan from the World Bank to build the country's largest solar energy and wind power generation project.
And in Ghana, the government is seeking to increase the tax rate for mining companies. According to the text of the 2012 budget, the corporate tax rates on mining could rise from 25 percent to 35 percent. Ghana is Africa's second largest gold producer.
Well, that's it from us here at this bustling Johannesburg market.
I'm Robyn Curnow.
And remember, you can always find us online at CNN.com/marketplaceafrica. There are links to my Twitter accounts as well as to our Facebook page.
Until next week, good-bye.