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QUEST MEANS BUSINESS
US Jobs Surprise; Not All Good News; Wall Street Response; Netflix Flap; German Recession Risk; Stock Markets Looking Forward; Euro Down; 3D Printing Revolution
Aired December 7, 2012 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, HOST: US unemployment down, job creation up, and the market rallies strongly.
Not having a ball. QPR cancels Christmas due to a poor performance.
And adding a new dimension to the printing process. Tonight, we print something in 3D, live on the program.
No, it's not me. I'm Richard Quest. It may be Friday, I still mean business.
Good evening. Tonight, US unemployment is at its lowest level in four years. The economy has added 146,000 jobs last month, almost double what economists told CNN Money they were expecting. The jobless rate concurrently fell to 7.7 percent. Look, you can see how jobless -- or jobs have been created over the course of the last 12 months.
The downside to this good piece of news, the long-term jobless are stuck. There are just 5 million people out of work for six months or more.
And perhaps most important of all, the revisions to the September and October report took away nearly 50,000 jobs, which we had originally thought had been reported and created.
Felicia Taylor is going to talk us through the nuances behind these numbers. She joins me now from CNN in New York. And Alison Kosik is at the New York Stock Exchange, and we'll factor in the market numbers and how it all plays out there. With you in a -- don't go far, Alison Kosik, we'll deal with you in a moment.
QUEST: Time, though, first of all for Felicia Taylor. Felicia, these numbers -- OK. There are a gazillion odd bits about them, aren't they? The timing of the survey, the revisions to previous months, the fact it's still pretty weak. So all-in-all, we shouldn't be off to the races.
FELICIA TAYLOR, CNN INTERNATIONAL CORRESPONDENT: Oh, absolutely not. When you say "nuances," there are so many different nuances about this jobs report and, frankly, I'm not really sure I understand why the market took it so positively and did have a little bit of a rally.
What's interesting is that there are two numbers here, right? We've got jobs created versus the unemployment number. What's interesting is they were taken at two different times. That's unusual. That doesn't usually happen. So, the unemployment insurance claims were actually filed later in the month.
So, when they say that Hurricane Sandy didn't have an effect, it did have an effect, because then you have to think about the number of workers that worked part-time.
TAYLOR: They weren't able to work full-time because of Hurricane Sandy. So, there's no question that -- and the real -- the real nuance in this is what you mentioned first, which is revisions.
That's the serious part. September and October were both revised downward. Expectations from every expert that I've spoken to expect this number to be revised downward as well, including Diane Swonk. Listen to what she had to say.
(BEGIN VIDEO CLIP)
DIANE SWONK, CHIEF ECONOMIST, MESIROW FINANCIAL: Also very important in this report, something that's not been talked about a lot yet is the downward revisions to both September and October.
Those initial reports were much stronger than they are reported, and if you look at the downward revisions, the net effect puts us right back where we thought we were on November, and that's not as good, either. I think that's very important to look at those downward revisions to both September and October. They were not as strong months as we originally thought.
(END VIDEO CLIP)
TAYLOR: Yes, and -- OK. So, let's take a look at that downward number in unemployment, which is 7.7 percent. On the surface, that looks really good, too, but the point -- and you well made it -- is we're talking about people that are under employed or have been longtime unemployed.
TAYLOR: There's about 40 percent of people that have been longtime unemployed. And that's not really reflected in the numbers. So, I don't understand how anybody can get that excited about this report, frankly.
QUEST: Felicia Taylor bluntly telling it as it is. Not surprising. Thank you, Felicia.
A drop in US consumer sentiment also added some downward pressure. Let's go to the stock exchange. Alison Kosik is there. Felicia is being very mealy-mouthed about this report. Are you also miserable about it?
ALISON KOSIK, CNN CORRESPONDENT: I'm not miserable about it, but you know, there is a sort of reality that nobody's talking about that you don't see in the numbers, and that's the fact that consumers and businesses are still very worried about how strong the US economy is or isn't.
With the fiscal cliff, those tax hikes and federal spending cuts sort of hanging over everything, you're really not seeing Wall Street making any big moves today, are you? Sure, the Dow's up a bit, but it's not this rousing rally, considering this report was much, much better than expected.
And we're also seeing this eat into consumer confidence. I'm talking about the fiscal cliff. You look at the University of Michigan's consumer confidence index, Richard, it plunged in the first week of this month because Americans, they don't know what to do -- or they don't know what to expect tax-wise next year, and that's a bad sign for retailers at the most important time of the year, the holidays. Richard?
QUEST: Does this story about Netflix that is -- fascinating, because Netflix --
KOSIK: Yes, it is.
QUEST: I think I can just about give it away in a sentence. Netflix CEO announced some better-than-expected viewing numbers or downloads or whatever Netflix does on his Facebook page, and now the main US regulator - -
QUEST: -- says no, that was market-sensitive information, it should have been announced with a press release into the market. Is that the gist of it?
KOSIK: It is the gist of it. And so, what you're talking about is what he put on his person Facebook page that customers, Netflix customers, were viewing more than one billion hours of video content a month.
And the thing is, no one's really seeing this piece of information anywhere, not a press release, it wasn't filed with the SEC. The day this hit Facebook, the stock jumped 13 percent. Now, the SEC is saying whoa, wait a minute. This has to be -- this violated the SEC's fair disclosure rules.
So, then you've got Reed Hastings coming out and saying two things. He's saying on the one hand, this was for full disclosure. 200 -- more than 200,000 people saw this. But then, on the other hand, he says, you know what? This isn't considered material to shareholders, something that the SEC says could be.
QUEST: All right, Alison --
KOSIK: So he's kind of talking on both sides of his mouth, here.
QUEST: Does this -- should we file this under the rubric "cock-up."
KOSIK: No. You know why? Because I think you're seeing companies like Netflix and even Tesla's main guy posted something as well. Social media is becoming a way to disseminate information, and something the SEC considers dissemination is really through news reports and press releases.
But when it wrote up its rules, it didn't consider Twitter and Facebook, so maybe you're seeing companies kind of spearheading this effort for the SEC and maybe other government agencies to kind of rewrite their rules on what's dissemination of information.
QUEST: Fascinating story. Absolutely we can always rely being at the forefront of this. Alison Kosik, have a great weekend, Alison. Alison Kosik at the New York Stock Exchange, at the forefront.
QUEST: That's what QUEST MEANS BUSINESS is all about. Tonight, we're going to be at the forefront. Look, this is a 3D printer, and during the course of the program, we will be printing something and discussing whether this is the future for all of our Christmas presents. Is it going to actually do anything --
KORNEL FARKAS, DIRECTOR, REPLICATOR WAREHOUSE: Yes.
QUEST: Or is it just --
FARKAS: Yes, hopefully.
QUEST: It will actually do something. Anyway, we'll be printing throughout the program on QUEST MEANS BUSINESS.
Also on the program, on the rebound, how Germany's stock market has managed to claw back its losses as the Bundesbank warns growth is flatlining.
QUEST: All right. We're to 212 degrees, it's getting hotter, and any second now, the printing will begin. Hang on. It's nearly there. Look --
Right. We were just -- it will actually work, won't it?
FARKAS: Yes. It is working.
QUEST: All right. It will work. We'll print something. What we'll print we'll show you before the end of the program. To Germany next --
(PRINTER STARTS UP)
QUEST: Oh! There we go! And we're under starters orders and we're off. Right. To the wall and to Germany now.
Germany may be slipping back into recession. That's the warning from the German central bank. It slashed its growth forecast for this year and next. The 2013 growth down to just 0.4 percent. It was 1.6 percent. That's a dramatic reduction.
According to the Bundesbank, outlooks dimmed, with a high degree of uncertainty and predictions. Wind the deck. The Bundesbank says a contraction is even possible in this quarter and into the quarter -- the first quarter of next year. Wind the deck.
DAX fell slightly today, even with this fall, as you can see, the DAX is still pretty much as a -- the highest point, or at least it's recovered most of the points since the fall -- beginning of the falls in 2008. It is close to near five-year highs.
Year-to-date -- this is the extraordinary thing -- the year-to-date, the DAX in Germany, is up 27 percent.
Now, this is really interesting, because on the one hand, you've got the ECB yesterday warning of slowdown and contraction. Today, you've got the Bundesbank warning of slowdown and contraction. You've got the United States moderate, sclerotic job growth. And yet, you've got the market rising sharply.
So, I asked ING's chief economist, Valentijn van Nieuwenhuijzen, how the market manages to rise 27 percent with so much poor to bad economic news.
VALENTIJN VAN NIEUWENHUIJZEN, CHIEF ECONOMIST, ING INVESTMENT MANAGEMENT: Obviously, markets are always looking forward, and what we are seeing now is the emergence of the first synchronized global recovery. It's still tentative. We're mainly seeing it in the US and China.
But if you look at the leading indicators, it's more and more likely that Europe and Japan will join next year, and most of the emerging markets will do that as well.
So, for the first time since 2009, we're getting something of a synchronized upturn in the global cycle. And next to that, all these tail risks, all these fears of austerity and systemic collapses, they are getting less and less.
There is gradual, but progress, in the eurozone and, most notably, obviously, the moves by the ECB are important. But also, the more realistic approach to the debt problems in Greece were an official sector haircut is now clearly on the agenda.
QUEST: Yesterday, we had numbers from Eurostat -- or earlier this week -- which showed the growth numbers, and the ECB had numbers revised downwards. If you're right and markets rise over time, which you are, of course, but the risk for the next 12 months must be on the downside, bearing in mind the statistics we've seen.
VAN NIEUWENHUIJZEN: Well, I think if you look at the ECB, obviously, you have to realize that their last forecasts were about three months ago. So, compared to debt benchmark, yes, they have lowered their forecast and their expectations.
However, if you look forward, you see, as said earlier, that other parts of the global economy are already recovering, and even the ECB itself mentioned that by the second half of next year, they are anticipating a pick-up in cyclical momentum in the European economy.
So, overall, although the average rate of growth is certainly very modest, especially in Europe, the direction of the cycle is moving upwards.
QUEST: I suppose -- if we take the gloves off, what I'm sort of -- what it really comes down to is I'm trying to suggest that the glass is most definitely half empty, and you are trying to tell me that the glass is most definitely half full.
VAN NIEUWENHUIJZEN: Well, what I'm saying is that markets by now really know where they are. They are pricing an environment which is very challenging. They understand the problems that are out there.
And obviously, sometimes they are overreacting, but they're doing that on the downside, as well, and if you see that the marginal direction is moving upwards, then at some point, these prices will correct to a somewhat less depressed outlook for next year.
And once you see that happening, prices moves up, and equity markets can make positive returns. And that is basically what we're seeing. We're coming from a depressed equilibrium, you can say, both in markets and the economy, and we're moving towards somewhat less depressed world. And financial markets like that. Any move in the right direction will help them to be a bit more cheerful.
QUEST: So, cautiously optimistic end to the year. And even aside from the economic picture, no one could accuse Valentijn van Nieuwenhuijzen -- well, look. There he was, but I wanted him to be getting into the festive mood.
(BEGIN VIDEO CLIP)
QUEST: Now, you have to get your people at -- to create a background for you with some snow and a Christmas tree for next time, so --
VAN NIEUWENHUIJZEN: I can easily do that, Richard, if you have just one second. Look, what do you think of that?
QUEST: Oh, very clever. Very clever. Thank you very much.
(END VIDEO CLIP)
QUEST: That's one interpretation of snow and the festive spirit. And while we're on the subject of snow, let's check up -- because this is actually what we are 3D printing at the moment, this is an example of what we are printing. It is the snowflake.
And if you get the camera in here, you'll be able to see that the snowflake is coming along very nicely. We're about -- we're halfway there. And we'll talk more about it with Kornel in just a moment, about this technology.
Tonight's Currency Conundrum for you. All of these African currencies used the shilling except one. Which is the odd one out? Is it Ethiopia, Kenya, Somalia, Tanzania, or Uganda? There's plenty of reference points there for you. The answer later in the program.
To the rates. The euro's down, the pound is flat, the yen is up. Those are the rates --
QUEST: -- this is the break.
QUEST: Putting an ink jet printer on your Christmas list is so last century. Forget printing photos. 3D printing is what is hot this year. 3D, all sorts of items, which are created. Joining me is Kornel Farkas, the director of Replicator Warehouse. Who is doing 3D printing at the moment?
FARKAS: Oh, it would be people who are modelers or would need prototyping objects, or some of these everyday objects.
QUEST: I know a lot of people now get -- is this the big growth area? Because this machine costs about $3,000. So, I can come to you and ask you to print something up.
FARKAS: Yes. Yes, absolutely, in our shop, you can come in, you can choose something for online databases, or we can design something for you and we can print it out. Or if you have your own model with you --
FARKAS: -- that you did yourself, we can print out for you, as well.
QUEST: So, that's the future, and we are at the moment printing one of these, and we've got 85 percent still to go. In a few years' time, we will have one of these on everyone's desk, mark my words. Carl Bass is chief executive of Autodesk. Their software is used to make the digital 3D models that these printers use. He told me the machines are like a revolution underway in our own lifetime.
CARL BASS, CEO, AUTODESK: There is something incredibly special about 3D printing. It's science fiction. I can sit -- I can now take physical objects and essentially send them around the world and have that thing appear somewhere else instantaneously. That's pretty amazing.
QUEST: Now, let's -- so, if we take the concept, where do you believe it gathers most momentum, and how soon will people like me be able to enjoy the benefits?
BASS: I think in the short term, people take advantage of this by building very special things. So, it'll be the kind of manufacturing that is really high-value but low volume. So, people will use it for prosthetic devices or for hearing aids. Something that has to fit you or something very personal, like jewelry.
But over time, it will start getting into areas where it's massively available, where it's another way of manufacturing.
QUEST: Because, of course, the machine has to have the raw materials, in the same way that my printer next to my desk has to have paper and ink. So, if you're going to make sneakers, it's got to have the materials that sneakers will be made out of. I mean, we are some way off from it being a generic printer, 3D printer, that will print anything, aren't we?
BASS: Yes. But this -- the range in materials that people are able to print in is changing dramatically. There's a huge amount of material science. Even recently, companies like Nike have essentially printed sneakers, and you can take the sneaker when you're done with it, and you grind it up into material that can be reused for the next sneaker.
QUEST: Is it a revolution that we are seeing in front of us? A manufacturing, scientific, science-fiction revolution that is now coming to reality?
BASS: Absolutely. We are now able to take this vast amount of computing, the things that have affected so much of the rest of our life, and now take it into the physical world, into the world of manufactured goods. And that's a revolution.
QUEST: It is finished. Take it out, Kornel. It would normally now take us a few moments to then remove it from this, because it, of course, is stuck on. But that is literally what 3D printing is all about. Making something that you've heard about in a 3D environment.
Next time you come on the program -- Kornel, thank you for joining us. Next time you come on the program, can you please make sure you print --
QUEST: -- one of those for us? Coming up after the break, an uphill struggle for global trade. The director of the WTO tells me why trading growth is slowing to a crawl. This is QUEST MEANS BUSINESS, good evening to you.
QUEST: Hello, I'm Richard Quest. More QUEST MEANS BUSINESS in a moment. This is CNN, and on this network, the news always comes first.
There were thousands of anti-government protesters who've broken through a barricade outside the presidential palace in Cairo and sprayed graffiti on the walls. The palace was the scene of deadly clashes between supporters and opponents of Mr. Morsi earlier this week. And a massive crowd is growing there again now.
A hero's welcome for Hamas leader Khaled Meshaal as he visits Gaza for the first time ever. His trip comes two weeks after the most recent conflict with Israel, which left 174 Palestinians dead. It's timed to coincide with the 25th anniversary of the founding of Hamas.
The UN secretary-general, Ban Ki-moon, is calling on the international community to provide more aid for Syrian refugees. He's been visiting camps in Jordan and Turkey, and he says the amount of assistance is not meeting the need. Concern is running high for the refugees' welfare as winter approaches.
A nurse at a London hospital who took a hoax call about the Duchess of Cambridge has been found dead. The duchess and duke say they are deeply saddened by the death of Jacintha Saldanha. She was the victim of the hoax call from two Australian disc jockeys who got information about Catherine's condition this week.
Kenya's Red Cross says at least two people have been killed and eight wounded in an explosion near a mosque in the capital. The Red Cross says ambulances at the scene are attending blast victims outside the Hidaya Mosque in the suburb of Nairobi.
QUEST: The outlook for global trade is getting worse. The World Trade Organization has slashed its forecast for this year. Global trade is now expected to grow by 21/2 percent, a sharp downward revision from April's forecast. Perhaps the WTO's chief, Pascal Lamy, says the brakes are now firmly on the global economy.
(BEGIN VIDEO CLIP)
PASCAL LAMY, DIRECTOR-GENERAL, WTO: World growth is slowing down and as a consequence of that, trade growth is slowing down.
QUEST: So, with that -- I mean, do we know and can we say it is because Eurozone is in recession? United -- China is slowing down, there's less capacity because of in the U.S. for imports, all the usual reasons of the global economy, but your trade numbers are the hard evidence that things are getting serious.
LAMY: That's correct. Of course, the big markets, which you just mentioned, starting with E.U. -- and we know that E.U. growth is -- and, unfortunately, will remain very flat for the years to come -- U.S., which still are below medium term.
And as a consequence of that, those who are producing for these big export markets, like China, Indonesia and others, now that's the main reason behind these low-growth numbers for trade. Now there are a few other reasons, more marginal, such as for instance trade finance, which has become expensive and sometimes scarce for small traders, small countries.
And then we have a bit of protectionist development, although nothing like big protectionist epitome, which we still fear and which we, as you know, tracking regularly and with a lot of vigilance, because that's the worst thing that would happen now --
QUEST: Sure. In blunt terms, Director-General, how serious is this? When we have unemployment at 11.7 percent in the Eurozone, we've got slowdowns elsewhere. Convince me why I need to be care -- why I need to care about this slowdown in world trade.
LAMY: I think we have to be lucid. World trade numbers are a reflection of a world economy which is below potential, high unemployment, lots of unused capacities. And at the end of the day, my own take on this is that what's lacking is trust, confidence, a certainty in the future.
We all know that many corporates are cash rich. I keep hearing wherever I go in the world, people saying we are ready to invest; we are ready to take risk. But in the present environment, we remain very cautious.
(END VIDEO CLIP)
QUEST: That's the director-general of the World Trade Organization, the WTO, Pascal Lamy. World trade down, the Bundesbank forecasting that they're -- that growth will be down, Eurostat forecasting European growth, down; the U.K. forecasting U.K. growth down; revisions down on U.S. unemployment and U.S. job creation down.
You might be tempted to believe that it is all miserable news, but this is something economists have been warning us about for some time. This is the market that's open and going up 64 points at the moment. In all this misery, well, don't worry too much.
Actually, maybe you should, because there some who say you should also take down the tinsel, box up the baubles. The football company QPR has canceled the Christmas party. And I'll ask you whether you think that's right.
(BEGIN VIDEO CLIP)
QUEST (voice-over): The answer to our "Currency Conundrum," which of these African countries does not use the shilling? The answer is A, Ethiopia. It uses the birr. Uganda's phasing out some old shillings. You only have until March the 30th before the 1987 shilling bank notes stop being legal tender.
(END VIDEO CLIP)
QUEST: That's fascinating.
Queens Park Rangers football has decided it doesn't deserve a Christmas party.
(BEGIN VIDEO CLIP)
QUEST (voice-over): The London team's manager backed the decision. Now he says, "I'm not a fan of Christmas parties, and we've got nothing to celebrate. We need to focus now on our football." Bah, humbug, some might say. The Christmas party is something of a tradition with U.K. football teams and often the source of mischief and merriment.
QPR's manager, Harry Redknapp, that was right when he said that nothing to celebrate -- look at this: the team is at the very bottom of the U.K.'s Premier League.
(END VIDEO CLIP)
QUEST: So it's set us all -- excuse me -- it set us all thinking here about whether you thought it was right and you've been tweeting @RichardQuest on the circumstances and whether you think it's right.
Do we all need -- as the song sang -- as the song says, we need a little Christmas. Well, Daniel E. Trujillo (ph) says, "Not when you consider the people whose jobs depend on the said Christmas parties." James Vertican tweets, "There will be something to celebrate if we win against Wigan Athletic tomorrow." Timothy: 'Arry did it with Spurs and it was key to our turnaround.
Ronald (ph) says, "A lot of Christmas bonuses have been canceled as well." And he says -- other people are tweeting basically, if people can channel the party resources towards the needy, then it is a good idea, says Abel Alimiki (ph), ESL. @RichardQuest is where you'll be able to join our tweeting discussion and have some thoughts on that.
Now if you're traveling around this weekend, you don't really need me to tell you that the weather is absolutely appalling. It's cold, it's snowy in large parts of the world. Jenny Harrison is at the CNN World Weather Center with much more details on that.
JENNY HARRISON, CNN METEOROLOGIST: Yes, Richard, we've been talking about this the last few days. So we're prepared this weekend hopefully. Perhaps you're already at your destination. But my goodness, there's a lot of snow around, some heavy rain, too, which I'll talk about in just a moment.
But all of this cloud that's been spilling across from the U.K., across the Channel, into France, the Low Countries, central Europe, eventually across to the southeast, this is where we've already been seeing quite a few problems.
Now you can see that as it's come across, the milder air, some rain, but of course turning progressively to snow, to sleet, to ice. And so in particular, we have got several airports that have had some long delays. KLM and Air France have been canceling flights, quite a few cancellations. You'll need to check about that, because you can see the amount of snow that's come down.
So it gives you an idea of why there have been some problems, some delays and some cancellations, 3 cm in Paris, 7 in Luxembourg and 9 centimeters in Dusseldorf. So this is the scene earlier on in Amsterdam. So they were reporting, according to Eurotrol control, 50-minute delays; Frankfurt was reporting 40-minute days.
There were some very long delays at Geneva after a temporary closure. You can see the problems here on the roads as well in Lille in France. Dusseldorf and Zurich also delays, but not as long as those other airports I just mentioned. Now, of course, not everybody is finding it particularly troublesome.
Berlin in Germany, these look like a very, very nice way to get about if you don't need to get there by rail, by car or of course, by air. But this is the system bringing that snow. Now it's going to continue to work its way into the southeast, bitterly cold air continuing to funnel down from the north.
So all of this combined is what is really going to lead to the problems as we go forward. And you'll notice there is another area of low pressure waiting in the wings. This one is expected to actually, again, work its way southwards along the jet stream.
But these are the current temperatures, so -4 in Berlin, the same in Munich, colder to the north in Scandinavia. Then you factor in the wind and it feels like -13 in Stockholm, -8 in Berlin and Munich and already hovering close to freezing or feeling like it in London. So this is showing you the temperature trend over the weekend.
You'll notice a little bit milder across the northwest and western France. Then the cold air comes back in below average temperatures. But look at this. This is really showing where the cold air is going to migrate to over the next couple of days. So the snow is going to continue to accumulate; it's going to stay there because of the temperatures.
Look at this, Stuttgart, nearly 8 centimeters, 7 expected in Frankfurt. So you can see how all the snow is working its way across central and southeastern Europe. And then when we look at this region, this is the next area of problems. You've got Slovenia, Hungary, Croatia, Romania, Ukraine, very heavy amounts of snow.
You can see some of the totals here as well, really adding up. Just look at it, Sarajevo 13 centimeters. Remember, of course, some of these cities are at those higher elevations. But at the same time as the snow comes across, the central and eastern Med, we're going to see some very strong storms, some heavy amounts of rain and so this is another area we need to watch.
So we've got that really nasty dividing line, too, between that milder air in the south with the thunderstorms, the snow and the ice to the north, the avalanche risk as well. Expect that to be higher over the next few days across the mountains, -3 in Berlin, -4 in Vienna on Saturday but not bad in London. They have a mild day, 5 degrees Celsius for you there, Richard.
QUEST: Jenny Harrison, we thank you. Have a good weekend, Jenny, and we'll see you next week.
And allow me to thank you for making time to join us for our nightly digest, our conversation on business and economics. We thank you for your time and attention. And that's QUEST MEANS BUSINESS for tonight. I'm Richard Quest. Whatever you're up for the hours ahead, I hope it's profitable.
ROBYN CURNOW, CNN HOST: This is where Hollywood comes to film in Africa. I'm Robyn Curnow at the Cape Town Film Studios. You're watching MARKETPLACE AFRICA. Now this multimillion-dollar complex is luring some big names in the film industry.
And of course, Cape Town's beaches and venues have long been a favorite of filmmakers. But this place says it's offering post- and pre- production as well as a controlled environment like this at a fraction of the cost elsewhere. Nico Dekker is the man in charge.
(BEGIN VIDEO CLIP)
CURNOW: What is Cape Town Film Studios, and why is it important?
NICO DEKKER, CEO, CAPE TOWN FILM STUDIOS: Remember when 20 years ago about people started talking about creating the first world-class studios in South Africa? But it has always been a dream because it has been so expensive. If (inaudible) studios normally from an economical point of view, it doesn't work. And that's very highly capital intensive with low income.
Why is it important? I think that the studio is a huge (inaudible) for our African industry. We've never invested in infrastructure. This is the first real investment in (inaudible) infrastructure.
So what it does, it creates a home, a base where filmmakers, national and international, can meet, where you can bring technology together, latest technology; where you can bring, you know, films like (inaudible), which was our first film of really transfer movies, never worked with 3D. So you can now suddenly shoot stuff that we can only dream from.
CURNOW: Why come here? There are cheaper places to do it. You can do it in L.A. There are more than enough sound stages there, production houses, why come here?
DEKKER: In the very first place, it is the value for money that we're able to prove to people. In a form like "Chronicle" from 20th Century-Fox, cost $12 million and Fox was totally stunned by it because the $12 million film is looking like a $30 million or a $40 million film on the screen. And that film at the box office that had more than $150 million. So that's a very strong argument.
The crews are fantastic in South Africa and now the (inaudible) film studios is just giving you that kind of ability to almost do anything. And I think our labor is important. Our labor, meaning artisans, you know, people working with building these sets physically. It is normal carpenters and we're (inaudible) metalworkers, costume makers, as costing a fraction of what it costs elsewhere in the world.
CURNOW: What are the challenges, though? Because obviously, I mean, feature films, it has picked up. We're seeing some, you know, quite famous Hollywood stars shooting here. But there's still real challenges, aren't there?
DEKKER: It is. But we are extremely thankful. You know, we are only a baby. I used to say to people, we are like a toddler. You know, toddlers still run around and pull things off tables. We're only hardly -- we're not even 2 years old. One can't believe it.
And we've worked already with most of the major studios in the world, but also a lot of independents. And I think the challenges in the first place would normally be, you know, travel; you know, you travel a long time and you must get into different environment.
And also to understand, of course, how to translate -- so, for instance, again, "Chronicle" was set in Seattle to shoot the whole of Seattle in Cape Town. It could be a challenge; but I mean, people are actually (inaudible) and they enjoy it. So again, I think we are used to try and create these worlds for other people.
CURNOW: And obviously this has got local government support here in the Western Cape and national government support. And it's crucial, because South Africa, like many places around the world, is suffering from massive unemployment, slowing growth, and this is an industry that really needs to be nurtured. Is enough being done?
DEKKER: I think that government has been slow initially to understand what film can do, because it's direct investment. It also filters down to your person on the street, because those people coming here, the crews, the people shooting, they spend money in hotels, in restaurants; they actually buy things; they sell the country.
It's got an impact on tourism. And luckily, we are starting to see that now. So our national government has now increased our rebate, which used to be very dismal. But it's now around about 20 percent uncapped, that means for every rand you spend in South Africa, you get 20 percent back.
That is, of course, (inaudible) not as comparative as countries like Australia, with a 40 percent rebate or Puerto Rico or places like that. But at least it gives us a good chance and I think we start to understand, wow, film, you don't need to go and create more very expensive (inaudible) film, and you get enormous skills (ph) transfer, job creation on the street immediately as you go.
CURNOW: "Long Walk to Freedom," one of the big movies that's going to be coming out in the next year or so, it's Nelson Mandela's story.
DEKKER: That's (inaudible) -- that's a fantastic honor for "Long Walk to Freedom" to be based here. It is the biggest film in terms of budget ever to be shot, I think, (inaudible). And it was for all of us fun to have at least our first big South African film using the studio.
And for many critics, (inaudible) people that were critical, saying the studio's just going to be for international film. It's not true. It is just as we ourselves, Africans; we need to almost free ourselves. We need to grow and to understand that the world out there -- out there is waiting for us. We've got everything now. We've got great crews, good stories. We've got a great studio.
And I think we just need now to start making commercial film. We start to make the "Chronicles" of the world ourselves. And that is maybe the next frontier for us.
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CURNOW: From the glamour of Hollywood to the glamour of so-called Avon Ladies, after the break, we speak to South Africa's Avon Ladies about their success selling door-to-door.
CURNOW: Lipsticks, lotions and potions (inaudible) pay money to look good. Now Avon, the cosmetics company, has had mixed fortunes globally. But here in South Africa, it seems to be building up a strong customer base. And more importantly, it's also providing jobs for women who would normally struggle to get employment.
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CURNOW (voice-over): The business of beauty: few companies have done it as long as Avon. The company has been in operation for 126 years and is the world's largest direct seller of beauty products.
TESSA UREN, REGIONAL SALES MANAGER, AVON SOUTH AFRICA: We've got a lot of people selling the products, but we also have a lot of people using the products. What you do find as well is we have a lot of customers who start using the products and then realize the opportunity to actually start selling to friends, family and they actually become our representatives as well.
CURNOW (voice-over): But in recent years, corporate gains have lagged. In 2011, Avon's global sales increased a mere 1 percent. South Africa was a glaring exception to that trend, with sales up almost 30 percent.
ALICE MTHINI, AVON SR. EXEC: This product cost (inaudible).
CURNOW (voice-over): Avon has long marketed itself as the company for women and it's women like Alice Mthini who are contributing to Avon's South African success.
Before I made Avon, I was doing domestic working. But in 2009, I was cleaning in a new house, where I asked the owner of the house (inaudible) ask him, did you sell perfume? And he said no. They are selling the opportunity to the women (inaudible) make money to be financially independent.
CURNOW (voice-over): It's that promise of financial independence that has driven Avon's growth in the South African market to an all-time high.
UREN: Well, since starting it over 16 years, since Avon came in and in terms of growth, we've grown year-on-year.
I think a lot of it has to do with we've -- we were still a very young market. A lot of our markets overseas are more mature markets. So there's still a big opportunity. And even now, with our population, there is a big opportunity. I think we also have the opportunity to expand into markets, into our rural areas where we'd never really touched before.
UNIDENTIFIED FEMALE: Can I come back tomorrow when you have got it (inaudible)?
MTHINI: It's given me much confidence, even to speak to people who say, no, I can't do it; (inaudible). I can do (inaudible) because I didn't go to school. So I tell them my story. I didn't finish schooling, too, but I'm doing so well that I'm developing people, the domestic workers, people who are selling in the streets are coming to make it work.
CURNOW (voice-over): Anna is one of the women Alice has brought into her fold. She's a 52-year-old mother of four and grandmother of seven.
ANNA SEANEDO (PH), AVON REPRESENTATIVE: Alice told me about Avon and she said it's a very good thing to do it because I can earn money and I can earn opportunity and all that stuff. So I (inaudible) to her. Then she sign me up and I became a representative.
CURNOW (voice-over): A career step, a recent Oxford University study found, can lead to social empowerment and economic autonomy for black women in South Africa. The study found the income earned by Avon ladies placed them in the top half of black females in their community and brought the in line with what a black South African man earns.
YVONNE NOLEBE (PH), DIVISION SALES MANAGER, AVON: The (inaudible) was Avon can put bread on the table. Avon can change people's lives.
We're not only selling the product; we're selling two products, actually. We're selling the product itself as being your lipstick, as being your roll-on, as being your body lotion. But the most important product that we are selling, we're selling the endless opportunity.
So most of the ladies that we are recruiting are not working. And when we offer them the opportunity, it's like we're offering them a job.
CURNOW (voice-over): With a 25 percent unemployment rate along with the fact that Avon requires no educational qualifications, and a startup fee of about US$8, it's not surprising that South African women are turning to Avon for earning potential.
And it's not just women.
LUCKY SETLELELE (PH), TRUCK DRIVER: First time I was telling me that Avon is a product for women. But they way they showed me the catalog, I can see that it's something with men and there is something (inaudible). And now I'm a truck driver, no, but I've got -- I've got something in place for a lot of jobs. But I can get (inaudible). This Avon, I think maybe I can save (ph) my life.
CURNOW (voice-over): But in a country where residents still face massive social and economic disparities, not even Avon can change everybody's life.
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CURNOW: Well, that's our show from a sound stage here at the Cape Town Film Studios. I'm Robyn Curnow. Thanks so much for watching. Remember, you can always find us online at CNN.com/MarketplaceAfrica. See you again next week.