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QUEST MEANS BUSINESS

EU Budget Talks Fail; Beyond the Budget; European Markets Up; Europe's Major Issues; Gains on Wall Street; RIM Rallies; Spanish Banks at Risk; Spanish Regional Row; Euro Surging Against Dollar; Black Friday Frenzy; Black Friday Sales; Wal-Mart Black Friday Protest

Aired November 23, 2012 - 14:00   ET

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


NINA DOS SANTOS, HOST: Agreeing to disagree. EU leaders throw in the towel on the EU budget.

Rising up against austerity. Catalans blame Madrid for their own crisis.

And shoppers battle it out for a bargain while retailers feel the holiday love.

Hello, I'm Nina Dos Santos and this is QUEST MEANS BUSINESS.

Good evening. The battle over the European budget has ended without an agreement being struck. Leaders have walked away from the two-day summit in Brussels without managing to see eye-to-eye on the size or structure of the plan.

The UK prime minister, David Cameron, has vowed to veto any increase in the budget, says that the trillion-dollar proposal presented to him was unacceptable.

(BEGIN VIDEO CLIP)

DAVID CAMERON, PRIME MINISTER OF BRITAIN: Frankly, the deal on the table from the president of the European Council was just not good enough. It wasn't good enough for Britain, and neither was it good enough for a number of other countries, including Germany, Sweden, the Netherlands, Finland, Denmark.

All of these countries are net contributors to the EU. In other words, like Britain, they write the checks. And together, we had a very clear message. We're not going to be tough on budgets at home just to come here and sign up to big increases in European spending.

From a budget of nearly a trillion euros, it is simply not acceptable to carry on tinkering around the edges, shuffling chunks of money from one part of the budget to another. We need to cut unaffordable spending.

(END VIDEO CLIP)

DOS SANTOS: European Commission president Jose Manuel Barroso says the talks have been extraordinarily complex and also difficult. European Council president Herman van Rompuy, for his part, says that with some states wanting bigger budgets and others wanting a smaller one, for the moment, he has no option but to stick with his proposed 80 billion euros worth of cuts at this stage.

(BEGIN VIDEO CLIP)

HERMAN VAN ROMPUY, PRESIDENT, EUROPEAN COUNCIL: I put this on the table after the all the consultations. There was -- there were some who wanted lesser cuts and some who wanted more cuts. And so, I kept the line, not excluding that in further stages, we will have to modify the level of the expenditures.

But I am proceeding in stages, and at this stage, I think the most wise solutions, given the divergences of use, was to keep this level of cuts of 80 billion.

(END VIDEO CLIP)

DOS SANTOS: As Europe's leaders wrestle it out over the budget plans in Brussels, other plans are slowly clicking into place elsewhere, notably the troika said that it's made some good progress, now, on drawing up a bailout plan for Cypress.

The European Commission, the ECB, and also the IMF, those bodies that make up the so-called troika, say that they're now awaiting the results of bank stress tests here for this country. Those ones are due out within a few weeks from now. If a rescue program is agreed, Cypress will be the fourth eurozone state to require financial aid so far.

Media reports also say that Greece is also close to striking a deal of its own to unlock its next slice of bailout funds. The reports say that the IMF has now managed to agree to relax its debt targets for 2020 and, as such, it will now accept an amount equivalent to 124 percent of Greek GDP instead of the previous level of 120 percent.

Let's have a look at how all of this affected equities. European stock markets actually ended Friday's session in the black, with banking shares almost among the top gainers. All of these indices were actually higher for the week as a whole.

There was positive economic news, particularly coming out of Germany, the biggest economy in the region. Over there, we saw the EFO survey of business sentiment unexpectedly rising, snapping six months' worth of declines.

We also government figures confirming Germany's initial GDP reading. Let me remind you that that showed that Germany's economy didn't shrink, although the pace of growth did slow. It slowed to 0.3 from 0.4 percent in the third quarter of the year, the Xetra DAX ending the day up about 0.9 percent.

Speaking of Germany, Holger Schmieding is the chief economist at Berenberg Bank. We spoke earlier about the European budget negotiations, and he told me that with crises in the bloc's peripheral economies, leaders in Brussels should focus instead on how the money is spent instead of squabbling over those budget cuts.

(BEGIN VIDEOTAPE)

HOLGER SCHMIEDING, CHIEF ECONOMIST, BERENBERG BANK: The EU should probably freeze its budget in real terms and reallocate within the budget away from French and German agriculture towards worthy projects, long-term growth projects in Greece, Portugal, and Spain.

DOS SANTOS: OK, so what does all of this mean for the political landscape going forward, because it's caused a significant rift between countries like the United Kingdom and other EU nations. What does this spell at a time when, of course, we've got countries like Greece that still haven't been sorted out? What does it spell for the EU going forward?

SCHMIEDING: Two things. First of all, it diverts attention, to some extent, from what nearly needs to be tackled urgently, that's the issue of Greece and a few others, whereas the EU budget, actually it's a ten-year budget plan, that's not extremely urgent.

And secondly, there is risk in this that Britain may find itself isolated and draw further away from the European mainstream, which could create political tensions over time.

DOS SANTOS: And probably not just political tensions for the EU with its other neighbors, but also the threat of a two-tier Europe, wouldn't it?

SCHMIEDING: Yes, that's basically the risk that is evolving. If the eurozone, which is highly likely, stays together, gets its act together, gets out of the crisis eventually, and Britain is sidelining itself ever more through its objections to the budget, we could go very much to a two- tier Europe and, unfortunately, increase the tendencies in Britain to possibly even up out of the entire European Union.

DOS SANTOS: Gosh, that's a strong statement. When do you think that might happen?

SCHMIEDING: I hope it will never happen, and I do think it won't happen. But the risk, the risk that it might happen, which looked extremely small two, three years ago is now no longer small. There may be a risk of, say, 20, 25 percent that at some time over the next five years, Britain decides in a weird referendum to really say good-bye to its major market, namely continental Europe.

DOS SANTOS: OK, let's turn towards Greece, because that is one of the issues that still remains unresolved as well, despite various meetings among eurozone finance heads. We've got another meeting coming up on Monday. Are you in any way confident that they're going to manage to see eye-to-eye?

SCHMIEDING: I'm pretty confident that by the end of next week or a few days later, we will have a deal on Greece. Whether it happens already on Monday, there are signs it probably will, but that's a very difficult call.

Indeed, beyond the general agreement on going that way or that way, there are many little numbers that you have to calculate, and I can understand that sometimes ministers at a late night meeting might think, OK, let's get our assistants -- give our assistants another day or two to look at the fine print before sealing the deal.

But the political signs are the will is there to get it done, and we are in general moving towards kind of consensus. Greece is given more time. It will be given lower interest rates, an extension of maturities, it will be given money to buy back its own debt, and there will be ways to make it add up on paper.

(END VIDEOTAPE)

DOS SANTOS: Well, trading on Wall Street is already finished for the week. Investors had a half day at work due to the Thanksgiving holiday this Friday. All the major indices showed some pretty solid gains, as you can see there. We saw rising retail stocks helping to pull the Dow Jones Industrial average above the 13,000 mark for the first time in two and a half weeks.

One standout stock in particular was the BlackBerry maker, Research in Motion. As you can see, it helped those indices, particularly the NASDAQ, to rise quite a bit. It rose about 13.5 percent on the day.

Well, RIM shares have actually been rallying on the back of hopes that its long-delayed BlackBerry 10 phones, which are due out next year, will probably help to return the company back to its days of profit.

As you can see here, though, its shares have actually gained about 85 percent in just the past two months, but they have been particularly depressed around the period of October to November there. That was when various profit statements were made by that company's new chief executive.

Now, Spain is under fire from the bond markets, from the ratings agencies, and even from its own local governments. Up next, why the regions are in revolt over the economy.

And when shopping meets civil disobedience. Wal-Mart faces protests on the biggest shopping day of the year. You're in fact watching live pictures of a Wal-Mart store in the Los Angeles area in Southern California where, as you can see, we've got shoppers fighting their way through protests. We'll have a live report later on throughout the course of the show.

(COMMERCIAL BREAK)

DOS SANTOS: Spain's banks are facing bigger credit risks, according to Standard & Poor's, while they've been hobbled by reckless borrowing for projects that now only serve as reminders of Spain's ongoing financial problems. Let's take a look at them.

Take, for instance, Ciudad Real Airport, here, on the left behind me. This building cost almost $1.5 billion to build. Within three years, though, it was closed down due to a lack of demand, and the visitors center cuts a pretty lonely figure just a few hours' drive from Madrid, this is.

And then, on my far right over here, you can see the nursing home outside Seville. This iconic building again cost around about $2.5 million to build, and again, it's a story of a building that's rarely, if ever, been used, not least because the halls weren't actually wide enough for stretchers to turn around inside it, which made it completely redundant for the patients and the nurses as well operating there.

One of the most important Spanish regions goes to the polls on Sunday, and economic arguments may well decide which way Catalonia votes. As Al Goodman now reports, many people there say it's not the regions that are causing Spain's problems. Instead, it's Madrid.

(BEGIN VIDEOTAPE)

AL GOODMAN, CNN MADRID BUREAU CHIEF (voice-over): Jordi Bolos is suffering from Spain's public debt crisis. The regional Catalan government, based in Barcelona, owes his pharmacy about $200,000 in reimbursements for public health prescriptions.

JORDI BOLOS, PHARMACIST (through translator): We have to buy the medicines, and later, the government pays us back. So, we are financing the public debt without getting any interest on it.

GOODMAN: He joined an unusual one-day pharmacy strike recently. It forced the Catalan government to pay some of the back due. But pharmacies in the neighboring Valencia region are on an indefinite strike, demanding six months of unpaid reimbursements.

GOODMAN (on camera): Nine of Spain's seventeen regional governments, including Catalonia, are so cash-strapped, they've asked Madrid for emergency loans to pay their bills. The Spanish government blames the regions for massive overspending.

GOODMAN (voice-over): One example, leftover from the boom years, this brand-new regional airport south of Madrid, which is closed. The regions don't control income taxes, but they get transfers from Madrid to administer public health and education and, in Catalonia's case, also the police and prisons.

This Catalan government official says Madrid sets fiscal policy, then hampers the regions on cost-cutting and even blames them for the economic crisis.

ALBERT CARRERAS, CATALAN SECRETARY OF ECONOMY: We are one third of public expenditure, so we can accept being responsible for one third of the problem. What we really object very much is the idea that Madrid and the Madrid government is refusing that we are the problem. This is not true.

GOODMAN: Yet Spain's main employers' association in Madrid says regions undeniably spend too much.

ALBERTO NADAL, BUSINESS OWNERS' CONFEDERATION: If you have a politician that is not responsible for revenues, only gets the money from the central government and they want to get votes, well, what they do is they spend as much as possible.

GOODMAN: But this Barcelona economist says Madrid also plays politics when doling out funds.

JOSEP COMAJUNCOSA, ESADE BUSINESS SCHOOL : The central government gives these transfers according to, of course, their expenditures or necessities, but also to according to political criteria.

GOODMAN: Politics and the economic crisis converge Sunday in Catalonia's closely-watched regional elections.

CARRERAS: We have been finding a central government that thinks of the country in a completely centralist way, in a uniform-istic way.

GOODMAN: Polls predict Catalans will vote strongly for two parties that support independence from Spain as a possible fix to the economic crisis.

Al Goodman, CNN, Barcelona, Spain.

(END VIDEOTAPE)

DOS SANTOS: A Currency Conundrum for you out there, now. The new mayor of the English city of Bristol has announced that he doesn't want his yearly salary paid in British pounds. So, here's our question this evening: how does he want it paid instead? Is it A, in a local currency? B, in community service? Or C, in apple cider? We'll give you the answer to that later on in the show.

Well, the euro's currently surging against the US dollar on the back of reports that Greece could be eventually closing in on a deal with the IMF, the ECB, and the EU on its latest tranche of bailout funds. And right now, one euro buys you just under $1.30. That's up around about three quarters of one percent from Thursday's session.

The British pound sterling is showing some similar gains. The dollar's holding steady against the Japanese yen.

(COMMERCIAL BREAK)

DOS SANTOS: Thursday's been and gone, so the Thanksgiving turkey is no more and, for Americans, that can only mean one thing: time to go shopping.

In what's become an annual tradition, shoppers besieged stores in the early hours of the morning in search of Black Friday deals. It's a crucial moment every year for the US retail sector, marking the start of the busy holiday shopping period.

Some stores like Wal-Mart even turned Black Friday into literally Black Thursday, opening on the evening of Thanksgiving itself to give people more time to try and grab what they wanted.

Well, let's have a look at Wal-Mart, because it says that it's actually having its best Black Friday ever, and people seem to be throwing everything -- literally everything -- into their shopping carts. Let's have a look at exactly what's going in. They're snapping up those everyday deals, and even some pretty expensive items.

So, as you can see here, since the stores opened at 8:00 PM on Thanksgiving, Wal-Mart managed to shift 1.8 million towels, some 1.3 million television sets, another 1.3 million dolls, here, and a quarter of a million bicycles.

But it's not just companies like Wal-Mart that are cashing in on this phenomenon. Higher stores -- higher-end stores are also doing pretty well, as well. Take, for instance, Victoria Secret. In Ames, Iowa, this clothing store managed to sell out of yoga within just five minutes of opening, and hoodies, also, did a roaring trade, as well.

Now, in total, MasterCard estimates that Americans are likely to spend more than $21 billion this Black Friday. That's up from 8 percent from last year's figure.

Well, Sears is 18 hours into its trading day, that big famous Black Friday, having opened its doors at 8:00 PM last night in the United States. So, on the evening of Thanksgiving itself. And, in fact, its head of merchandise says that the early start made for a profitable and slightly less frantic Black Friday. Jim Boulden asked him how sales have been going so far.

(BEGIN VIDEOTAPE)

RON BOIRE, PRESIDENT, SEARS AND KMART STORES: The holiday got kicked off in nice fashion last night. One of the really interesting things, I think, that's going on is a shift in how consumers are behaving during this holiday period, during the Black -- traditional Black Friday period.

It started a couple years ago, and I think we saw a continuation of that trend where people are choosing to shop a little bit earlier and they're choosing to shop multi-channel.

So, we're seeing customers buying online and picking up in our stores, in the stores, using their technology, the iPads and other technologies that we provide to shop in a multi-channel fashion. So, it's a really interesting consumer shift in how people are buying and how they're looking at buying during this holiday period.

JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT: But what kind of products are we talking about here? Are we talking about very discretionary products, or are they also going and buying the clothing? Because when I think of Sears, to me, of course, it's hardware and clothing.

BOIRE: Yes, so, it really was -- what we're seeing is consumers coming in for the discretionary products. Certainly, consumer electronics is high on everybody's list, and that's always a driver category for this time of year.

But what we saw yesterday, and I think we're seeing continuously today, is people buying a broad selection of goods. So, shoes are selling very, very well. Our apparel, which has been the Sears box been doing well over the last four or five quarters, continue to do well. Of course, appliances, which is a strength for Sears --

BOULDEN: Yes.

BOIRE: -- as well as tools. And in the Kmart stores, it's about apparel, it's about toys, and it's about footwear and the basics. So, it's a mix of consumer --

BOULDEN: Yes.

BOIRE: -- discretionary as well as things that are staples.

BOULDEN: And I guess Black Friday still shows you that people want to go to the store, don't they? They want to physically be in that store.

BOIRE: Yes. People are tribal. They like to interact with the product. They like to touch it, they like to feel it.

And for us, completing that experience and allowing them to do that in the store and allowing them to have an integrated experience, and whether they decide to finally purchase, or whether it be a sweater or an appliance online or in the store, we're frankly agnostic to. We want them to have the experience that they want.

But people truly do like getting out, and one of the things that we saw last night, and I think one of the big trends in retail is, this Thursday night shopping experience is a little more relaxed, a little more fun and festive, than what we've seen in traditionally at the 5:00 AM door busters, where somebody might have been standing in line for hours.

These are people who've had dinner, kind of relaxed, said you know what? I think I'll go to the mall, start my holiday shopping. It's a really interesting trend to show -- to see that customers are -- I personally feel a much more relaxing shopping experience on Thursday night than what you typically see in the morning on Black Friday.

(END VIDEOTAPE)

DOS SANTOS: That's the head of marketing at Sears speaking to CNN's Jim Boulden. Let's head over to another famous US retailer, though, that's seeing a lot of people outside its doors for a completely different reason.

Now, Wal-Mart may be having a busy day at the tills, but out in the parking lot, it's quite a different story. Hundreds of people have chosen today to stage protests against the company. Kyung Lah is outside a Wal- Mart in Paramount, California, to monitor the situation over there, and she comes to us live.

Kyung, so, there's a lot of people behind you, but they're not actually going in and out of the doors, so I gather they're protesters rather than shoppers.

KYUNG LAH, CNN INTERNATIONAL CORRESPONDENT: Well, they're doing a bit of both. What has happened throughout the morning here is that they've sort of been moving the people so that protesters get their say, but shoppers are able to get through. It's a quite interesting meeting of the two worlds.

What you're seeing here is the very tail end of the protesters coming through. This is a mixture of Wal-Mart workers who have not shown up for the job, but also a good portion -- a good majority of the people here are labor supporters.

And this is something that we've seen at the nation's largest retailer, not just here in Southern California, but at other stores around the United States. From Wal-Mart stores in Texas to Wisconsin to Atlanta, Georgia, to Maryland.

We've seen hundreds of employees coming out, not showing up at work, joined by other labor groups, and saying that they want to talk to management in an organized manner about pay, about retaliation, about better health care, and that they want to come and talk to management about this.

It's complicated, because Wal-Mart workers are not officially unionized, and so what the company is saying is that this is a cover for labor groups to try to unionize the workers here at these -- at the nation's largest retailer.

So, seeing a bit of a conflict on a very potent day, financially, and also emotionally for Americans, as we've seen, Nina, a very important day to try to -- for these companies to get into the black. But also consumers to get a good deal.

DOS SANTOS: So, in terms of sales, are they actually doing rather well today, Wal-Mart? We heard the head of Sears who is saying that opening up on Thanksgiving Day itself actually releases a bit of the pressure on Black Friday. Would Wal-Mart say the same thing?

LAH: Wal-Mart opened its doors at 8:00 PM in the United States on Thanksgiving. So, it was very early. And what they are saying is that Wal-Mart is going to end up having its best Black Friday sales ever. That is despite the labor problems that it's seen at some of its largest stores.

They're saying really at the end of a day, it's a wash. They haven't really been impacted. And Wal-Mart is also saying officially they only believe about 50 employees did not show up for work as scheduled to take part in all of this.

But if you talk to any of these workers out here, you pull them aside and you say how many employees didn't show up at your store? They're saying the numbers are far, far higher, that Wal-Mart is not telling the public the truth.

DOS SANTOS: OK, Kyung Lah there in Paramount, California outside a Wal-Mart store this Black Friday. Thank you ever so much for that.

Well, the kinds of problems that Wal-Mart has been facing with some of its stuff completely pale in comparison to what we're going to be talking about after the break, because in South Africa, discontent among mine workers has left some big scars on the entire mining industry.

It's also taken its toll on the economy, and the damage might reach all the way to the top as the public questions President Zuma's handling of this crisis.

(COMMERCIAL BREAK)

DOS SANTOS: Hello and welcome back, I'm Nina dos Santos. These are the main news headlines from CNN this hour.

(BEGIN VIDEO CLIP)

DOS SANTOS: Anti-government demonstrators are protecting into the night in Cairo's Tahrir Square. You're seeing live pictures there of the people still on the scene. While hundreds of protesters are gathered there outside, the crowd is just starting to thin out after hours of standing there and chanting their slogans.

But violence is still continuing, I must point out, on nearby streets across Cairo, as it has done for much of the day. Protesters furious that the president, Mohammed Morsi's decree granting himself sweeping new powers have been battling police and the president's own supporters.

(Inaudible) President Morsi has attempted to calm fears that he's tried to become a dictator. He told a huge crowd of supporters in Cairo that he issued the decrees to create political and social stability until a new constitution is ready for the country. And he said he has no intention of using his new powers to settle any scores against any particular group.

The fragile cease-fire between Israel and Hamas is being tested after an incident along the Gaza border on Friday.

Hamas says one man was killed and several others were wounded when Israeli troops opened fire on some farmers who were trying to reach their land. The Israeli military won't confirm anyone was killed, but it says its troops were trying to stop a large group of Palestinians from breaching the border.

(Inaudible) reports of violence and fatal bloodshed in Syria. An opposition group says that 43 people were killed across the country on Friday. And in the meantime, Turkey has requested Patriot missiles coming from NATO (inaudible) concerns about the impact that the conflict is having on the region, and particularly on Turkey. Syria is calling that a newfound act of provocation.

(MUSIC PLAYING)

(END VIDEO CLIP)

DOS SANTOS: In South Africa, the Marikana inquiry into the deaths of 34 striking miners has held a minute's silence to remember those who lost their lives. Well, the men were killed in a single day of protests back in August, and all this week we've been examining the repercussions from the labor unrest that took place.

We looked to the personal, financial and also technological costs. And today we'll see some of the political implications. South African President Jacob Zuma came to power on a platform of improving the lives of the country's poor. And now in light of the Marikana incident, well, his leadership is being questioned.

Nkepile Mabuse has this report, and we should point out a warning for viewers: some people may find some of these images disturbing.

(BEGIN VIDEO CLIP)

NKEPILE MABUSE, CNN CORRESPONDENT (voice-over): After hearing that police killed 34 protesters demanding a pay raise at a platinum mine, South African President Jacob Zuma cut short a foreign trip in August to respond to an incident that reminded many of the brutality of apartheid.

JACOB ZUMA, SOUTH AFRICAN PRESIDENT: Today is not an occasion for blame, finger-pointing or recriminations.

JULIUS MALEMA, FORMER ANC YOUTH LEADER: President Zuma --

MABUSE (voice-over): But already fingers were being pointed at him.

MALEMA: President Zuma presided over the massacre of our people.

MABUSE (voice-over): Zuma's critics called for him to step down, saying the shooting at Marikana was further proof he's unfit to lead.

Some analysts say the commander in chief of the continent's largest economy is more comfortable leading from the back.

SOMADODA FIKENI, POLITICAL ANALYST: In a crisis of this nature, consultation itself may give you all different signals. Sometimes one has to take a risk and take all the steps.

MABUSE (voice-over): Credit rating agencies were quick to respond. They downgraded South Africa for the very first time since apartheid. By the time Zuma launched new bank notes bearing Nelson Mandela's image in November, instability had stripped the currency of some of its value, and more than a billion dollars in revenue had been lost as unrest in mining spread.

Zuma has rejected being labeled a failure. He says those who ruled before him are to blame.

ZUMA: I don't think that question really makes sense to me that, because of what colonialism, apartheid, exploitation did, then this president must be blamed for it.

MABUSE (voice-over): But in 2007, the former Freedom Fighter rose to power on a pro-poor (ph) ticket, ousting his predecessor Thabo Mbeki, who was seen as pro-business.

Today, unemployment is nearly 26 percent and income inequality has surpassed that of Brazil. The global economic environment hasn't helped, nor have local newspaper reports that claim Zuma's spending $20 million of taxpayers' money to upgrade his home. The president says the improvements are for security.

There's a lot of anger and disappointment after 18 years of democracy, but the ANC's strong history still counts for a lot in a country where the opposition has been fractured and weak. But post-Marikana, smaller parties are uniting behind calls for Zuma to go. They're pushing for a motion of no confidence in the president to be debated when parliament resumes next year.

With the majority of his party believed to be behind him for now, Zuma has good reason to remain unrattled.

QUESTION: Has the pressure of the job been getting to you in the last few months?

ZUMA: No. I think ever since I became the president, it has been just the same.

MABUSE (voice-over): Nkepile Mabuse, CNN, Johannesburg.

DOS SANTOS (voice-over): Well, the strike may be over, but the repercussions still reach far and wide. Don't forget to tune into CNN throughout the course of the weekend to watch our special, "South Africa after the Strike."

(COMMERCIAL BREAK)

(MUSIC PLAYING)

(BEGIN VIDEO CLIP)

DOS SANTOS (voice-over): Time now for the answer to today's "Currency Conundrum," earlier in the show we asked you which -- what the mayor of -- the new mayor of the English city of Bristol wanted to have his yearly salary paid in, so which kind of currency?

And the answer was A, the local currency. Let's remind you that Bristol recently launched its own currency which is for the Bristol pound, and that note, the symbol of it on the left, as you can see there, it's paid by the British pound and to be used in local businesses in that town.

(END VIDEO CLIP)

DOS SANTOS: Well, despite big bargain potential of Black Friday, scenes like these are driving many shoppers out of the stores and instead onto the Internet. We're talking about hordes of people clamoring on the doors to get in and grab a bargain.

Here's Dan Simon with more.

(BEGIN VIDEO CLIP)

DAN SIMON, CNN CORRESPONDENT (voice-over): Online versus brick-and- mortar, it's a battle for your holiday dollars, perhaps, has never been so intense. For years, Internet merchants like Amazon had a key advantage in states like California -- no sales tax. Local bookstores, already under pressure by the rapid rise of e-books and large bookstore chains, felt particularly squeezed.

Michael Tucker owns a chain of bookstores in San Francisco.

MICHAEL TUCKER, BOOKSTORE OWNER: If you can save 10 percent, why wouldn't you?

SIMON (voice-over): But Amazon's tax advantage recently disappeared in California, adding 7 percent to nearly 10 percent to the cost of each order. It also began taxing this year in other states, like Pennsylvania and Texas. Online retailers collect tax only for states where they have a physical presence.

Now here in California, Amazon is building two giant warehouses, including this one near Los Angeles. It's a million square feet. And for the old fashioned retailers, it's another reason to worry.

SIMON: Why? Because Amazon's goal is to get items to customers faster and to be able to offer same-day delivery.

That's right. You can avoid stores if you want and have a package delivered to your house in a matter of hours.

SIMON (voice-over): A win for consumers, but tough for local retailers.

COLIN SEBASTIAN, BAIRD RESEARCH: If Amazon creates distribution centers and facilities on their turf locally that takes away the one advantage that we see retailers have left to compete against Amazon. So it is a big deal.

SIMON (voice-over): Internet analyst Colin Sebastian says that means retailers need to up their game.

SEBASTIAN: Retailers need to take a lesson from Amazon. They need to focus on the consumer experience. They need to become more sophisticated both offline and online.

SIMON (voice-over): Those who want a lesson on how to thrive could learn from Books Inc. in San Francisco.

TUCKER: We've had almost everything that comes down the pike that could flatten an industry.

SIMON (voice-over): Amidst a tidal wave of change in the industry, Michael Tucker's dozen stores are thriving.

TUCKER: Everybody can get the books. But the staffs that we have really and the readers that we have that are working with the public, that's the difference. That's the different factor we have, tremendous staff that are engaged with those communities.

SIMON (voice-over): A basic reminder to all retailers Internet and otherwise that good customer service could be the decisive factor in winning over business.

UNIDENTIFIED MALE: Thank you.

SIMON (voice-over): Dan Simon, CNN, San Francisco.

(END VIDEO CLIP)

DOS SANTOS: Jenny Harrison is standing by to tell us about the weather.

Jenny?

JENNY HARRISON, CNN METEOROLOGIST: Yes, Nina, not a good day, of course, (inaudible) not a good few days, really, across much of the U.K. in particular. Let me just start by showing you this satellite across Europe.

You can see that huge swath (ph) of cloud. It is now clearing across into mainland Europe. So taking the rain with it. But in the meantime, how about a look at some of these images, because --

(BEGIN VIDEO CLIP)

HARRISON (voice-over): -- the flooding has been really very widespread. Now (inaudible) what you're looking at here is the car that did actually have a gentleman who lost his life; his car was swept away in the floods. He was rescued and taken to hospital, but sadly, he died later.

And there's just been so much widespread flooding and a lot of it, of course, we've seen the roads just completely washed away and wiped away. This is actually (inaudible). This is in Somerset, to close to where the man lost his life.

This is also very close by. This is actually (inaudible) landslide there, down in Devon there were mudslides. We've had areas of Wilshire completely underwater, and of course, people here just trying to clean up, very widespread. And a loss of the surrounding countryside, of course, under, as you can see here, a lot of water; can barely see the road.

Another image just to show you a car again in Somerset. This is another image of that other car that I was just telling you about. And then, of course, the amount of rain that's been coming down has led to all of this. There are so many warnings and watches in place.

This, as you can see, is the radar in the last few hours, some snow to the highlands of Scotland. There's the system now, working its way across mainland Europe, but the rain nowhere near as heavy. Look at these rainfall totals, 24 hours worth of rain, 92 millimeters in Exeter, in Devon. This is why we've had so much flooding.

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HARRISON: And just very quickly, I want to end on this, because this from the U.K. Environment Agency, there are 160 flood alerts and just about 50 flood warnings across much of England and Wales. So (inaudible) just need to take care over the next few days, Nina, because there's more rain on the way.

DOS SANTOS: Certainly will. Jenny Harrison, thanks so much for that.

And that is QUEST MEANS BUSINESS for this week. Have a great weekend, whatever you're doing. MARKETPLACE AFRICA continues.

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DAVID MCKENZIE, CNN CORRESPONDENT: Hello, I'm David McKenzie in Luanda, Angola. Welcome to a special edition of MARKETPLACE AFRICA. We're here because Angola is the second largest producer of oil on the continent. We're going to take an exclusive look inside Angola's oil industry.

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MCKENZIE (voice-over): So we're heading offshore, across 150 kilometers of Atlantic Ocean, deep inside the Gulf of Guinea to Block 17. And the floating factory (inaudible). It's Angola's flagship oil development, operated by French oil giant Total. This is the Saipem 12000, a sixth-generation drill ship.

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MCKENZIE: So we've got our protective gear on, and now I'm going to see the real workings of the ship where they bring out the oil from the ground. And to do that, I've got the company man with me. He's known as Lourens Zonneveld.

LOURENS ZONNEVELD, COMPANY MAN: Hello.

MCKENZIE: Thank you very much. So we're going to have a look?

ZONNEVELD: Yes, David. We're going to have a look.

MCKENZIE: Let's go see.

ZONNEVELD: Follow me.

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MCKENZIE (voice-over): As the company man, Zonneveld manages day-to- day operations on the drill ship. Like any drilling operation, the heart of the process is on the rig floor. Drill teams are running casings into the drilled hole to stop it from collapsing. This rig can drill to 35,000 feet.

Much of the work is now automated. Drill parts assembled on board, ready to go.

ZONNEVELD: You see this; this is sixth-generation drill ship, yes. It's the highest (inaudible) there is. And on this -- on the rig you see here that everything has already been premade up. The casing is already made up (inaudible). And the drill pipe as well (ph). So the amount of (inaudible) that people have to do on the rig floor is limited.

He's also got the controls for the rotating the top (inaudible).

MCKENZIE (voice-over): But teamwork is still crucial.

ZONNEVELD: Support and that everybody is committed and that we work in a team because one man can jeopardize the operations.

MCKENZIE: That's a lot of money could be lost.

ZONNEVELD: It's a lot of money and it's also a matter of working efficiently.

MCKENZIE (voice-over): Technology helps that efficiency. Drill operates sit on cider-based (ph) chairs to control the drill mechanism.

ZONNEVELD: Good morning, guys.

UNIDENTIFIED MALE: Good morning.

UNIDENTIFIED MALE: Good morning.

UNIDENTIFIED MALE: Good morning.

MCKENZIE (voice-over): And in the ultra-deep water, a team of remotely-operated vehicles or ROVs inspect and repair the subsea hardware, too deep for divers to reach.

One of the biggest challenges for any drill ship is that it's a ship attached to the sea floor by the drill. To avoid accidents and oil spills, it's crucial to stay stationary.

CAPT. NICOLA AMBROSINO: We take one controller almost every place over the ship. So those monitors (inaudible) on the main parts, which we are to keep under control.

MCKENZIE (voice-over): To give movement under control, Captain Ambrosino has a lot of gadgets: GPS and backup positioning satellites, six propellers, two complete diesel engines, automatic and manual steering. The ship's systems have complete redundancy.

MCKENZIE: So everything has a backup place?

AMBROSINO: Everything has a backup. If there are some spools which approaching, so we have to be prepared. We are to be ready in order to keep the position (inaudible).

MCKENZIE (voice-over): And even when a storm rolls over the Atlantic, the ship can keep its position within half a meter, he says. On the Saipem 12000, all of these technological advancements serve one purpose only: to extract Angola's black gold safely and cheaply and to sell it to the market.

MCKENZIE: Now the oil isn't actually brought up by the drill ship. It doesn't come to the surface here. It's extracted from the well and then it's shipped along a pipeline all the way across to the treatment production facility over there, which is about 4 kilometers away. And that's where the hydrocarbons are separated. That's where we're going now.

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MCKENZIE (voice-over): Next on MARKETPLACE AFRICA, state-of-the-art advantage in Angola's offshore fields. But how is Angola using its oil well? That's the billion-dollar question.

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MCKENZIE (voice-over): We've been given exclusive access to Angola's Block 17, a 220,000 barrel-a-day offshore concession run by Total. The true leviathan of the fleet is the FPSO Pazflor. The floating production, storage and offloading ship is a refinery, oil tanker and gas station rolled into one.

PHILIPPE BRANJONNEAU, PAZFLOR OFFSHORE INSTALLATION MANAGER: Indeed, you run some huge operations so by the day we have around 200 persons working here 24-hour days, working and sleeping here 24 hours a day, seven days a week and all the year long. It never stops.

MCKENZIE (voice-over): The Pazflor is almost as big as an aircraft carrier, generates enough power to light up a city and can store 2 million barrels of crude.

MCKENZIE: So the production levels are so high here that every four to five days a tanker will come out to the offloading buoy, which is just in the yellow off in that direction. They'll come in; it will take about 24 hours to take in the crude oil. They'll take in about a million barrels and then sail off to markets across the world.

MCKENZIE (voice-over): Once the cost of developing the concession has paid off, almost all of the profits from Block 17 will go to Sonangol, Angola's state oil company.

MCKENZIE: The vast majority of Angola's revenue comes from oil. More than 90 percent, in fact; some people are asking serious questions as to where the money has gone.

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MCKENZIE (voice-over): Angola's GDP has grown by several hundred percent in the last decade as the hangover from long wars led to a hunger for profits. But oil deals are shrouded by confidentiality agreements. It's almost impossible to gauge how much money flows in to Sonangol, which is both concession granter and regulator of the industry.

MCKENZIE: How much money does Angola make from its oil?

SEBASTIAO GASPAR MARTINS, EXECUTIVE MANAGER, SONANGOL: I would say it's a huge amount, 1.75 million barrels a day, which of course, if we multiply, at the end of the year, we make billions.

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MCKENZIE: The question is some people have asked is where's all that money going? People don't quite understand the flow of money because your books are effectively kept closed.

MARTINS: You visited Angola; you've been able to see a little -- a little bit of what Angola is today. And you can see where the money goes.

MCKENZIE (voice-over): A shiny new boardwalk in Luanda, luxury developments and an influx of Portuguese ex-pats are all signs of oil wealth. But most Angolans live on less than $2 a day; few can afford housing. Even in Luanda, basic necessities like water and electricity are often lacking.

Activists like Elias Isaac says the much-vaunted oil wealth bypasses ordinary Angolans.

ELIAS ISAAC, OPEN SOCIETY INITIATIVE: We don't see, you know. We don't see the money that is being generated from oil. Having that active impact on people's (inaudible). Angola makes a lot of money out of oil.

This is -- there is no doubt about this. Angola is one of the few countries that can really, you know, pay its national budget without (inaudible) funding, which is great. But where this money goes, you know, that's the biggest issue (inaudible).

MCKENZIE (voice-over): Human Rights Watch contends that tens of billions of dollars of oil money skip the central bank entirely and disappear. The IMF says Sonangol spends billions off the books. Oil revenues have created an enormous slush fund for the country's elite, says Isaac.

MCKENZIE: Is oil money being stolen?

ISAAC: You know, to say that is not being stolen I would not be true to the situation because if the money, the oil money was not being stolen, we could have better social services in this country.

MCKENZIE: So where is the money going?

ISAAC: Someone is taking it.

MCKENZIE: And who is taking it?

ISAAC: I don't know. You know, we have to find out.

MCKENZIE: One of the more pointed criticisms of Sonangol by Human Rights Watch, particularly in global witness, is that Sonangol acts as a way to funnel money from the oil revenues to the political elite.

What is your response to that?

MARTINS: I'm not the right person to be asked this. But --

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MARTINS: Yes. I'm on the board of Sonangol, but I can assure to you that the most of our revenues are used to the wealth of our country and our people.

MCKENZIE: Most, but not all.

MARTINS: I would say all or depending on how you interpret it the way I'm saying, because what is our role? We have a production revenue. We put the production revenues on the hands of the Ministry of Finance.

MCKENZIE: So you say once the money leaves Sonangol, it's out of your hands?

MARTINS: Yes. I think is on the hands and it's the way it should be, goes to the hands of the government.

MCKENZIE (voice-over): The Angolan government denies corruption in the oil sector and recently it announced a $5 billion sovereign wealth fund, a move welcomed by lenders for its transparency.

(Inaudible) final millions (inaudible) social development and infrastructure. It's all possible because of offshore developments like Pazflor, where technological advancements have made deepwater finds highly profitable. And Angola's offshore oil reserves are far from (inaudible).

MCKENZIE: Oil companies will soon be opening up new oil fields off Angola, and the country hopes to become the largest producer of crude in Africa. But with a history of corruption and problems with transparency, the biggest challenge will be that the profits from this (inaudible) down to ordinary Angolans.

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MCKENZIE (voice-over): Until then, ordinary Angolans say that only a tiny sliver of elites will truly benefit from Angola's oil.

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