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US Begins Fiscal Cliff Talks; US Markets React; Main Players in Fiscal Cliff Talks; Greenspan on Fiscal Cliff; European Markets Slump; Chile's President Confident Europe Will Recover; Pound Flat, Euro Down, Yen Continues Slide; Dangers of Trial by Twitter

Aired November 16, 2012 - 14:00   ET


NINA DOS SANTOS, HOST: Bargaining over the budget. President Obama begins talks over the fiscal cliff.

Former Fed chairman Alan Greenspan warns there will be pain ahead.


ALAN GREENSPAN, FORMER CHAIRMAN, US FEDERAL RESERVE: I think if we have to have a moderate recession to solve this huge fiscal problem that's in front of us, I think that is a very small price to pay.


DOS SANTOS: And a landmark case to prevent trial bit Twitter. A British politician sues those who wrongly branded him a pedophile.

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

Good evening. Democrats and Republicans in the United States have started the long, nerve-wracking tiptoe away from the edge of the fiscal cliff. President Barack Obama met with rival party leaders for the first official talks over the budget since his reelection. And the top Republicans and Democrats agreed that it was, quote, "a constructive start to these negotiations."

Well, together, they need to reach a deal on expiring tax cuts and automatic spending cuts that will be coming into force from January. Mr. Obama's just started budget talks with civic leaders now at the White House. Let's go over to Maggie Lake, who joins us now, live from New York with the latest on all of this.

So, Maggie, I gather some headway was made. We're seeing a bit of a softening of the stance. Will it be enough?

MAGGIE LAKE, CNN INTERNATIONAL CORRESPONDENT: Yes, it does seem that way, Nina, but it's important to remember, this is rhetoric, and they're far away from inking a deal. But it's been a little bit of a roller coaster because post-election, there certainly seemed to be an opportunity to reset relations. Both sides seemed to be talking more about compromise.

But then, a lot of sort of reaction in Washington, a lot of articles were talking about the fact that they were sort of hardening in their stances again, and that had a lot of people who've been watching this very nervous.

Today, there seemed to be a concerted effort coming from congressional leaders and President Obama to change that perception. Have a listen to what they had to say after the meeting.


SEN. HARRY REID (D), US SENATE MAJORITY LEADER: Something has to be done. There is no more "let's do it some other time." We're going to do it now, and I think it was -- very comfortable with each other and this is something we're going to wait until the last day of December to get it done. We have plans to move forward on it.

REP. JOHN BOEHNER (R), US SPEAKER OF THE HOUSE: I believe that the framework that I've outlined in our meeting today is consistent with the president's call for a fair and balanced approach. To show our seriousness, we put revenue on the table, as long as it's accompanied by significant spending cuts.


LAKE: Now, if true, that is significant. Putting revenue on the table, that means that perhaps Republicans are considering some tax cuts. Remember, that has been the big point of disagreement, they don't want any new taxes on any Americans. Democrats have been arguing that the rich should pay some sort of higher tax, and that is where the divide has been.

But Nina, let's all be realistic about this. The devil is in the details. These are not new players, these are the same group of leaders that were not able to come to a deal before. But again, I those meetings, they were all talking about the fact that that's not the case. They know something needs to be done now.

DOS SANTOS: Now, for the benefit of our international viewers, Maggie, run us through exactly why taxing the wealthiest people in society is quite -- such a contentions issue in the United States these days.

LAKE: It's a good question, Nina. There's not a great answer to it, I have to tell you. A lot of people scratching their heads and wondering why. I think what it's fair to say is that Americans in general are anti- tax. It has always been the way. People in general do not want any kind of tax increases.

But as everyone's laid out from the economists that we have on the show day in and day out, we've got a massive debt problem, and that is no longer the case. And in fact, you've seen a change in perception in the public opinion. And in exit polls after the election, about 60 percent of Americans said they were in favor of raising taxes on the richest Americans, those making over $250,000.

Why the Republicans -- what the Republicans argue is that they don't want to hurt the economy. They believe by raising taxes on the rich, that you would squash economic activity. They are the sort of economic drivers.

But the American people seem to disagree with that. The Democrats certainly disagree with that, so we're going to have to find -- see if they can find some middle ground. But it seems to be a difficult arguing position for Republicans.

And I want to give you one more stat from some of the surveys being done, Nina. In a Pew survey this week, 58 percent of Americans said they would blame the Republicans if this deal doesn't get done. So, the Republicans certainly have a lot of pressure on them right now.

DOS SANTOS: OK, Maggie Lake, bringing us the latest there from New York. Thanks ever so much for that.

Let's have a look at how the US markets have responded to what's been going on in Washington. And as you can see, we've got the Dow Jones Industrial average up about 34 points, or about a quarter of one percent at the moment.

Must point out that US markets did manage to turn higher on the back of these talks after some progress seemed to be made, but as Maggie was very keen to caution, it is rhetoric at this point rather than actual hard numbers that have been put on the table.

Let's just examine this issue a little bit more. These are the main players here involved in these White House talks that we've been talking about.

Heading over across our landscape of Washington to the House side of the Capitol building, the leader of the Republican-controlled body is this man, he's the House Speaker, John Boehner. Now, his approach involves tax reforms, as Maggie kind of hinted there. He's warned that Republicans won't accept anything that includes higher taxes for the wealthy.

However, that's something that House Democrats led by this lady, the Representative Nancy Pelosi have continued repeatedly to demand. She's instead focused on extending middle income tax cuts.

That takes us over to the Senate side of the Capitol now, because Harry Reid is also somebody who wants a further extension of middle class tax cuts. Agreed -- he managed to agree that back in July. Now, he says that he can fight, but he'd rather, instead, dance with the Republicans.

He'll find it hard to fall into step, though, with some people like, for instance, this man, his counterpart, Senate Minority Leader Mitch McConnell, who is dead against, as you can imagine, President Barack Obama's proposal of raising America's top -- tax for America's top earners.

So, as you can see, we have a number of parties in play here. If we're going to get an agreement by January the 1st, these are the four people who will need to find some kind of common ground from one side of Washington to the next.

Well, a former Fed chief says that driving off the fiscal cliff may turn out to be, perhaps, the right thing for this country. It is a contentions point of view, I might point out. Alan Greenspan was the Fed chairman for almost 20 years between 1987 and 2006, and he says that while the fiscal cliff may be dangerous, it's nowhere near as bad as continuing with the way things are today.

Earlier, he got the chance to speak to CNN's Ali Velshi, and this is his point of view.


GREENSPAN: We're running into a stone wall here in which the more social benefits we have which we don't contain, the lower the rate of savings, the lower the rate of growth, and a lesser quantity of real resources to fund the benefits. This is obviously an unsustainable situation, and the sooner we come to grips with it, the better.

And I raise the issue of allowing the Bush tax cuts to rescind on schedule. It's not that I want taxes to go up, I think it's a terrible idea. Relative to what? If we don't close this deficit fairly quickly, we are in real trouble.

Remember, it's always easier to cut taxes politically than it is to cut spending, so if you have to allow a significant rise in taxes to essentially cut a deal on a major benefit cut, that's a good deal for me, because it's always easier in the future to cut -- politically to cut taxes than it is to cut spending.

ALI VELSHI, CNN CHIEF BUSINESS CORRESPONDENT: Can that happen? Is there -- would the immediate tax cuts that we are looking at now help get us there?

GREENSPAN: Tax cuts? I'm sorry?

VELSHI: I'm sorry, the immediate spending cuts without the tax increases?

GREENSPAN: No, look. IMF studies show definitively that if you cut spending in a situation like this, it does lower the GDP, but nowhere near the amount that an increase in taxes lowers the rate of increase in GDP.

So I think if we have to have a moderate recession to solve this huge fiscal problem that's in front of us, I think that is a very small price to pay. Because we're not going to get out of this thing without pain. There's a presumption here that we have a whole schedule of economic policies which can just basically solve the problems to a normal situation.

It is not. This is an extraordinarily unprecedented situation, and unless and until we rein in the spending growth, this economy can't function.

VELSHI: So, what do you suggest that America can do to get that strong economic growth and those high levels of employment? What sort of pain should our politicians be saying we have to be ready to take? Do we eliminate the mortgage interest deduction? Do we eliminate things that people are really used to but might need to give up?

GREENSPAN: We can get very large chunks of effective spending out of the system without any material change in marginal tax rates. But is it going to be easy? No.

All of those tax subsidies or all of those tax benefits are there for reasons. There are constituencies beneath all of them and a general presumption that this is going to be done without any real disruption to the economy is nonsense.

We -- all of the low-hanging fruit of solving these types of problems has long ago been picked. And I don't see that there's any easy way to solve this problem except to just brute changes that need to be made and they are hurtful. If we don't do it, the markets will do it for us.


DOS SANTOS: Alan Greenspan may be a hugely respected figure in the world of economics, but we should point out that he does have his critics out there, mostly for his failure to anticipate the last financial crisis. And he admitted to Ali that mistakes were made.


GREENSPAN: Asking about the issue of deregulation, I plead guilty. I, yes, believe that it's very helpful to have a competitive American economy.

And I think I misjudged in my own analysis exactly what the risk premiums were within the markets, because we had no historical evidence of what, for example, the so-called "fat tail" on risk outcomes were, because we never experienced them in the types that we ran into in 2008.

The actual currents in 2008 surprised me with respect to the size of what the problem was, and it now looks in retrospect that we needed far more capital in our financial intermediaries than we, in fact, had.

And if, in a sense, you're saying -- if you're asking was -- did I misjudge how much we would need? The answer is, yes, I did. And I didn't realize that until we actually experienced the 2008 -- financial problems.


DOS SANTOS: Former Fed chairman Alan Greenspan, there, speaking on CNN earlier today.

Well, Europe's had something of a tough Friday, largely because of events stateside. The major stock indices finished the session in the red. Investors continue to be concerned over the so-called fiscal cliff and those talks in the United States. The markets also extended losses on the back of escalating violence between Israel and Hamas members in Gaza.

Now, keeping the faith. Chile's president tells me that he's confident Europe will manage to recover from its ongoing debt crisis. Plus --


JIM HAGEMANN SNABE, CO-CEO, SAP: There is a strong political will to solve the situation around the euro.


DOS SANTOS: And one of the bosses of SAP says that EU leaders have what it takes to pull through the dark economic days ahead. Do stay with us here on QUEST MEANS BUSINESS.


DOS SANTOS: Chile's president Sebastian Pinera has confidence in Europe. The businessman turned political leader sat down with me here in London to send a message that his own country is very much open for business these days. He also wants closer trade ties with the eurozone despite its present troubles.


SEBASTIAN PINERA, PRESIDENT OF CHILE: Well, we're fully aware of the problems that Europe is experiencing, but I'm very confident that Europe, which is the largest economy in the world, will be able to recover. And therefore, we are trying to strengthen and deepen our economic relations and political collaboration between Europe and Chile.

DOS SANTOS: Nevertheless, that requires a certain amount of investment and political capital, if you like, as well, as well as money. And the horizon is so unclear for the eurozone. Your thoughts on that?

PINERA: It is true. I think that next year will be a very tough year for Europe. But I think that you are doing the right things, trying to reestablish fiscal austerity and economics.

And in the meantime, we do have a partnership agreement with Europe, which is already ten years old. And therefore, we are discussing with Europe to try to modernize that partnership agreement and include more relationship, not only in terms of goods, not only in terms of services, investments, and collaboration in every field.

We have just signed some agreements with the United Kingdom government in terms of collaboration in the Antarctic in science and technology, in education, in many fields. So, we have very strong ties with Europe and we want to deepen and strengthen those relationships.

DOS SANTOS: Presumably, there's also opportunities in Europe, as well, for Chilean companies, particularly in places like Spain.

PINERA: Definitely. Chile is investing a lot in Europe, so it's not only European investment going to Chile, but also Chilean investment coming to Europe. And that's good for both parties.

DOS SANTOS: Now, I must ask you about the looming fiscal cliff in the United States, because that's the big question mark out there, isn't it? If we do go over the fiscal cliff, if we do see a recession in the United States, that would have significant headwinds to places like Chile.

PINERA: Of course. We are a very open and integrated economy. We have free trade agreements with more than 60 countries in the world, including the US, Europe, China, India, Japan, Korea, Vietnam. And therefore, we are very much affected with what will happen in Europe and the US. I hope that the US will find the wisdom and the courage to avoid the fiscal cliff.

DOS SANTOS: How do you think they could do that?

PINERA: It will take a bipartisan agreement.

DOS SANTOS: Do you think they'll reach a bipartisan agreement?

PINERA: Well, if they don't reach an agreement, the US economy will suffer a lot.

DOS SANTOS: The reason why I'm asking this, obviously, it's difficult as another president, one wouldn't want to lecture one's colleagues, but everybody has a stake, even countries like Chile, even countries like the United Kingdom.

PINERA: Of course because right now, Europe is in a recession. The US has a very weak and unstable recovery. The giants of Asia, like China and India, are reducing its capacity to grow, and therefore, there's a very strong need for a wide and very deep agreement within Europe but also between Europe and the US and the rest of the world.


DOS SANTOS: Ghana's struggling currency, the cedi, is reportedly on the rise. The government says that it's on track, now, to reach an eight- month high by the end of this very year. That's largely thanks to measures that have been introduced by the Central Bank of Ghana.

And that in turn brings us to today's Currency Conundrum. Where does the word "cedi" actually come from? Is it A, from a Cowry shell? Could it be B, from gold? Or C, from seeds?

Here's a clue: the answer has actually come up before in our Conundrums here on this show when we've asked you about early forms of currency. So, you'll have a couple of minutes during the next commercial break to wrack your brains.

Now, let's move onto the current currencies out there. The pound is basically flat against the dollar today, and the euro is down amid all that talk of the fiscal cliff. The Japanese yen is continuing to slide, though, after an election was called in Japan for the month of December.


DOS SANTOS: Twitter users are getting a reminder of why they need to be particularly careful what they tweet. A senior UK politician is threatening to sue users who wrongly linked him to a child sex abuse scandal.

McAlpine is a member of the House of Lords and he's set to receive a payout of nearly $300,000 from the BBC. CNN's Matthew Chance now reports on the risks contained in 140 characters or less.


MATTHEW CHANCE, CNN SENIOR INTERNATIONAL CORRESPONDENT (voice-over): He's dubbed it a "trial by Twitter." Former British politician Lord McAlpine linked on social media to damaging child abuse allegations. The allegations were false.

But on social media, his name was trending as people, some with thousands of followers, tweeted comments or re-tweeted those of others. Now, Lord McAlpine, who says he was terrified and became a figure of public hatred, says he wants legal retribution to deter social media users from engaging in this kind of slander again.

CHRISTOPHER HUTCHINGS, MEDIA PARTNER, HAMILNS SOLICITORS: Part of the motivation between Lord McAlpine's action is to send a message, a public health warning that we have to use social media more responsibly, that it has to be recognized that it can spread information, and often wrong information, virally across thousands and thousands of users. So, I do think that this is an education for all of us using social media.

CHANCE: The nasty tweets, as Lord McAlpine's lawyers have called them, may cost a lot of people a lot of money.

CHANCE (on camera): This isn't the first time social media users have found themselves in litigation over their comments. In the biggest payment to date, US musician and actress Courtney Love agreed to pay $430,000 to a fashion designer whose reputation and business she is said to have ruined with defamatory tweets.

Earlier this year, New Zealand cricketer Chris Cairns was awarded more than $140,000 after being wrongly accused of match fixing. But the Lord McAlpine case is on a much broader scale. Lawyers say it could see legal action against thousands of users who tweeted or even retweeted his name.

CHANCE (voice-over): It may prove a landmark case, dispelling for good the idea social media chatter is like gossiping to friends and revealing it as something far more potent and potentially dangerous.

Matthew Chance, CNN, London.


DOS SANTOS: In case you hadn't noticed, there's a fiscal cliff on one side of the Atlantic and a debt crisis on the other, and as such, it's not an easy time to be running a major company. But one CEO says he knows how to stay ahead, and we'll hear from him after this.


DOS SANTOS: Hello and welcome back. I'm Nina Dos Santos, these are the news headlines this hour.

Israel has closed roads into Gaza as the exchange of rocket fire with Hamas militants continues.




DOS SANTOS: Two Hamas rockets hit an open area south of Jerusalem as air raid sirens there were sounded. Bombs have also continued to fall on Gaza. Palestinian Authority president Mahmoud Abbas has called the actions an aggression against all Palestinians.

The UN nuclear agency says that Iran is not cooperating enough for it to conclude Tehran is conducting, quote, "peaceful activities." The IEA has released a report detailing its position on Iran's disputed nuclear program. It says the director general can't report any progress in clarifying issues relating to possible military dimensions of Iran's program.

German chancellor Angela Merkel clashed with Russian president Vladimir Putin over the sentencing of members of the Russian punk band Pussy Riot. A visibly irritated Mrs. Merkel met with the Russian leader today at the Kremlin, where they both shifted the focus onto economic cooperation between their countries. Trade between Germany and Russia is worth more than $80 billion every single year.

An oil sheen stretching 800 meters has been spotted in the Gulf of Mexico after an explosion on an oil platform. Eleven people were injured in the blast and two more remain missing. The US Coast Guard says that less than a barrel's worth of oil had actually been spilled.

The home furnishings giant Ikea has apologized for using forced prison labor to manufacture goods during the 1980s. East German political prisoners were used to build furniture for some of Ikea's suppliers, according to an investigation conducted by Ernst & Young. The report says that some managers didn't do enough to stop it.



DOS SANTOS: No company is immune from the effects of Europe's ongoing debt crisis. That is the assessment coming from Jim Hagemann Snabe, who's the co-CEO at SAP. But the head of the German software firm says that there is enough political will in Brussels to find a solution. I asked him earlier how his company was adjusting.


JIM HAGEMANN SNABE, CO-CEO, SAP: Yes, there's no doubt we live in a much more uncertain world than what we're used to. We believe it's the new reality.

And clearly there is a need for strong leadership, both on country level -- we're seeing new governments come in play -- as well as on business level.

I think we all need to show leadership to transition from a discussion around the euro crisis and debt and stabilize that system and move into, we believe, a conversation around innovation, because there's so many opportunities to create new growth opportunities in the world and solve problems in new ways (inaudible).

DOS SANTOS: And if we double back on the situation in the Eurozone, this region is now officially in the midst of a double-dip recession. Again, how will that affect SAP, your Eurozone based company?

SNABE: Yes, that is correct. And obviously, there is no company that is immune to a crisis. But our strategy has been also focus around how do we help companies in the current situation. You said it; the market is uncertain, which means for companies, they need more accurate data to run their business.

They need more real-time data to run their business. And they need to make decisions based not on what happened last quarter, but about predictive analytics about what are the trends in the market and what might happen the next quarter.

And therefore, our innovations around in memory computing, where we can analyze enormous amounts of data in real time and help companies predict the future, it is a way for us to be an answer for companies in Europe. We've seen double-digit growth in Europe, 11 quarters, because we have the software to help companies maneuver in this economic (inaudible) environment.

DOS SANTOS: So your kind of software helps people to model for things going forward as well. Let me ask you this. I know we've talked about it in the past, but we have to come back to square one at some point. Some economists are saying that Greece could be out of the Eurozone by March. Presumably SAP has a contingency plan. Do you?

SNABE: We don't have a contingency plan in that sense. We think there will be a strong Eurozone also in the future. And I've spent a lot of time with politicians in Europe, and I see there is a strong political will to solve the situation around Europe.

Greece, I believe, is a very special situation. We don't have, of course, a large portion of our revenue in Greece and we are even seeing Greek companies investing in technology. So I think the Greek situation can be isolated and I do believe that while it will take some time, I do believe that there will be a stable Eurozone also in the future.


DOS SANTOS: The head of SAP there, speaking to me earlier.

Now there's a threat from Europe from the United Kingdom, but this time it has nothing to do with bailouts. A fungal disease is snuffing the life out of Britain's tree population. We'll have more on the growing crisis and what's being done to stop the rot.





DOS SANTOS (voice-over): Hello and welcome back. You're watching QUEST MEANS BUSINESS here on CNN. Let's show you the answer to the "Currency Conundrum" we asked you earlier on in the show.

Ghana's currency is the cedi. So what does it actually mean and where does it get its name from? The answer is A, a cowry shell, which is used in Ghana. (Inaudible) was used in Ghana back in the late 19th century as money over there, so there you have it. You learn something new every single day.


DOS SANTOS: Well, tens of millions of trees in Britain are under threat from the disease which could alter the British countryside forever. It's already costing some farmers hundreds of thousands of dollars and experts think that things could get quite a bit worse from here on.

CNN international correspondent Nic Robertson is investigating another kind of Eurozone crisis that's been hitting Britain's shores.


JIM C. SMITH, URBAN FORESTRY ADVISER, FORESTRY COMMISSION: This is common, actually. It's -- this one's actually a healthy one.

NIC ROBERTSON, CNN SENIOR INTERNATIONAL CORRESPONDENT (voice-over): There is a silent killer on the loose.

SMITH: This one's (inaudible) healthy. The type of symptom that we're looking for initially on the leaves of the ash (inaudible) is the leaves are all black.

ROBERTSON (voice-over): Britain's 80 million ash trees are at risk. The country's landscape may never be the same again. Ash dieback disease, the fungus Chalara fraxinea, has arrived from mainland Europe.

SMITH: It's been identified, I think, now, confirmed in 126 sites across the country, roughly half and half in the nursery trade and in the wild environment. It's the ones in the wild environment that's most serious.

ROBERTSON: The government is taking the issue so seriously that in recent days they've convened meetings of their cabinet crisis response committee, COBRA, more normally used to dealing with imminent terror threats.

And the government group in charge of woodland, the Forestry Commission, has conducted an emergency national survey. But for some people, the actions are coming too late.

ROBERTSON (voice-over): Burnt stumps, all that remains of 50,000 ash saplings, destroyed on government orders. The owner is angry.

ROBERT CROWDER, CROWDERS NURSERIES: We've seen evidence of the disease on young -- on nurseries in Denmark and Germany and Holland, and we told the government in 2009, and they chose not to do anything about it.

ROBERTSON: And you knew you were under threat?

CROWDER: We absolutely knew we were under threat.

ROBERTSON (voice-over): Robert Crowder's family have been growing and selling trees since 1798. This, the worst he's seen. Losses so far more than $320,000.

CROWDER: We've now had a financial loss as a result of their indecision -- well, we're saying at least 200,000 pounds, but we've got the cost of destruction on top of that.

ROBERTSON (voice-over): The loss to the nation of its fourth most abundant tree could be incalculable. When the disease hit Denmark, 90 percent of its ash trees were infected. Here, government scientists say it's too soon to know the full impact.

ROBERTSON: While the government may have been slow to respond, environmentalists have not, creating this new aptly named app, Ashtag. It helps you identify the disease with a series of pictures and upload a photograph of a suspect tree with its location as well.

TOBY HAMMOND, ADAP+ UNIVERSITY OF EAST ANGLIA: The color of the pins indicates how likely or unlikely we think the report is. And the red pins are the ones to worry about here.

The Ashtag app --

ROBERTSON (voice-over): The app is Hammond's brain child, spurred by fears of huge tree loss.

HAMMOND: We made it in a weekend out of a lot of late nights, a lot of coffee.

ROBERTSON (voice-over): Close to 10,000 app downloads in barely a week, more than 500 unverified sightings uploaded. It is already an important tool for the government.

HAMMOND: By crowd sourcing, by getting involved and all the people who are out walking their dogs or may have an ash tree in their garden that they're concerned about, then we're harnessing that motivation to do something positive to try and map the extent of this disease right now.

ROBERTSON (voice-over): Ashtag's applications may grow in the future.

The environmentalists are calling for an immediate change of its department's priorities to spot, track and stop the outbreak. His scientists warn of more diseases to come.

IAN BOYD, CHIEF SCIENTIST, DEPARTMENT OF ENVIRONMENT: It's almost certainly because of the movement of goods, the movement of people as well. It's much, much greater now than it has ever been in the past. And as a result of that, that tends to move pathogens across national boundaries and also geographical boundaries, where they've never done -- they've never passed before.

There's also climate change as well, which is happening.


ROBERTSON (voice-over): Since the millennium, 11 new plant killer diseases have entered the U.K., according to scientists. In the whole of the last century, it was only five. If ash dieback disease has a silver lining, the scientists say, it is to better prepare for the future -- Nic Robertson, CNN, London.


DOS SANTOS: Let's bring you an update on the weather forecast. And to do so, we go over to Jenny Harrison at the CNN Weather Center.


JENNY HARRISON, CNN METEOROLOGIST: Hey there, Nina, yes, some widespread fog across parts of Europe. But at the same time, some very heavy rain and strong winds in particular. I'll say yesterday we had warnings in place across Portugal.

This area of low pressure which has been coming through has indeed had with it some very strong winds and now a possible tornado has been reported, right down there in Lagoa on the south coast in the Algarve.

Now this particular event, it was certainly spotted as a funnel cloud coming on shore. They will yet need to confirm it was actually a tornado. But there's been some widespread damage. As many as eight people were injured, had to be taken to hospital, cars overturned.

A lot of the firefighters actually had to rescue people out of the cars because obviously the (inaudible) and, indeed, if it was a tornado, well, you know, what happens there with those circulation winds. So this is why that a warning's in place because of events just like that, of course the rain coming down as well.

But then across in central Europe, this has been the problem. Look at this, the Eiffel Tower or just a little bit of it, just the lower portions, because the rest is completely shrouded in some pretty dense fog.

So Friday not a good day, not in the morning hours, to actually travel. And then across in Switzerland, believe it or not, underneath all that layer of fog is actually Lake Geneva. So it really is a fairly common problem this time of year.

But this is how it looks from the air. Look at this satellite image, not snow, but indeed fog, very widespread.

And as I say, really causing some problems and only of course if you're trying to fly, because obviously you can't fly, take off and land in fog like this, but also on the roads, very dangerous indeed when you get such dense fog, but common for this time of year when we've got high pressure in control.

Now that high is still pretty dominant across much of mainland Europe. It'll begin to change to the northwest. We've got this next front coming through (inaudible) some fairly heavy rain across portions of western Britain. And then that system in the southwest, the (inaudible) which brought that reported tornado, that continuing to push across much of the Iberian Peninsula.

And then the system which in the last couple of days brought heavy rains across the central Med, that is continuing to work its way eastwards, and again some warnings here. More heavy rain and again, always the threat of those tornadoes. So a bit of a mixed weekend ahead, Nina.

DOS SANTOS: Thanks so much for that, Jenny Harrison, have a great weekend yourself over there at the CNN International Weather Center.

And on that note, it's time to say goodbye, have a great weekend, all of you. Whatever you're doing out there, that's it for this edition of QUEST MEANS BUSINESS. Thanks for joining me. I'm Nina dos Santos in London.




ROBYN CURNOW, CNN HOST: You're watching MARKETPLACE AFRICA. I'm Robyn Curnow. This week, we're going to look at the aviation industry in Africa and how it's taking off. Commercial routes are limited and many African airlines can only get you so far. But that doesn't stop jet- setting in Africa. Smaller, privately-owned aircraft like these are taking to the skies, creating new routes.

And more importantly, making Africa, Nigeria in particular, one of the fastest growing private jet markets in the world.


UNIDENTIFIED MALE: The need for business jets is becoming more of a necessity than a luxury.


UNIDENTIFIED MALE: Right now, we're seeing a lot of development, a lot of growth in West Africa.

UNIDENTIFIED MALE: Nigeria is a big developing market with a number of aircraft (inaudible) Nigeria has grown by 650 percent.

UNIDENTIFIED MALE: I've been a pilot for just under 21 years now. I'm (inaudible) the Bombardier Global Express XRS. It's got fantastic features. Let me go and show you.

In this front part, you can -- actually, you can carry nine passengers. These seats are fully reclinable. They can twist 360 degrees and they're comfortable, as you can see.


UNIDENTIFIED MALE: The back bedroom's got its own bathroom. And then we've got a galley area for the (inaudible) and also a seat with a space can sit in the front. And they can always see the two pilots right in the front.


UNIDENTIFIED MALE: Business men are the biggest users. So that's probably more than 50 percent of our customer base.


UNIDENTIFIED MALE: In business perspective, with resources are located which is the (inaudible), BRC, Tanzania (ph), Kenya and this part of West Africa. Most Nigeria, but Ghana and other places develop in there significantly.

In Africa, more commercial aviation industry is not as well developed as it is in North America. The routes are limited. You cannot fly to many African countries directly. You certainly can't fly to many locations in Africa directly.

UNIDENTIFIED MALE: With the issues in Europe and then North America and the economies, we're finding a lot of the emerging markets are providing our best return. In my case, I focus on Africa and Africa is an emerging market where we see a positive future.


UNIDENTIFIED MALE: Africa's rich in gas, minerals, oil, gold, platinum, you name it. And we're finding a lot of interest from overseas companies, focusing their attentions on the resources of Africa. Clearly, that bodes well for us, because it means we have to take those people to these places in Africa.

UNIDENTIFIED MALE: Nigeria, at the moment, it's -- really, it sees a lot of business units going into Nigeria. There's a lot of money there, obviously, and that's why there's so many business units going in there. And it has a booming market in terms of aircraft sales and also as a hub from flying from Africa to Europe and to the U.S.

UNIDENTIFIED MALE: Like everyone else, general aviation took a knock back in 2007.

We (inaudible) recoveries. We (inaudible) airport deliveries are starting to get back to where they were back then.

UNIDENTIFIED MALE: Over the next 20 years, we do forecast 810 business jets to be sold into Africa. Right now we are looking at East Africa and North Africa for some additional sales. But we can lose focus of where the business is, and that's in West Africa and South Africa.



CURNOW: So what does it take to conquer the African skies? Find out after the break.




CURNOW: From starting an air charter company without any aircraft to operating one of the largest independent air charter businesses in South Africa, Ernest Kekana is a high flyer. Well, Errol Barnett recently caught up with him here at the Rand Airport in Johannesburg to talk about aviation in Africa.


ERROL BARNETT, CNN CORRESPONDENT: Now you used to be a pilot for South African Airways. Where did this interest in aviation come from?

ERNEST KEKANA, CEO, K5 AVIATION: I've been told by my elders that I used to speak about flying when I was yea high. I always wanted to find -- get in airplanes and go off somewhere.

BARNETT: How big is your fleet?

KEKANA: Normally, we're hovering between nine and 11 aircraft at any given time. During our busiest season, we've had up to 17 aircraft on our fleet.

BARNETT: And what led you to a decision to begin your own chartered plane company?

KEKANA: My flying career, I realized that there is potential for growth and so I, you know, I took the opportunity to, well, why not start my own business and see what I can do to try and promote and develop aviation, you know, inside Africa and in Africa, you know, by Africans.

BARNETT: So how do you do it? How do you go from being a pilot, working within a large corporation to saying, I'm going to start my own company?

KEKANA: You save.


KEKANA: You save money. Yes. So that's basically what we did. So I think I was a youngster there in my 20s, and you know, I had to knock on doors of wealthy individuals and corporations that owned aircraft and said, hi, I'm Ernest; can we lease your multimillion-dollar aircraft so we can operate it on charter?

So it was a big of a daunting experience (inaudible).


BARNETT: What kind of a reaction would you get as a 20-something young man, walking in, you know, to these offices, saying, let me use your plane?

KEKANA: If you walk in, you have the right attitude, and they can pickup whether you're serious or not. If you're there wasting time (inaudible). We really had a game plan in place, so we present our business plan, our proposal and say, well, this is what we want to do.

You know, are you in or are you out? Do you want work for your airplane or don't you? And you know, nine times out of 10 we received a positive response. And (inaudible) was born.

BARNETT: Nine years later, K5 aviation has a fleet of planes. And this is 100 percent black-owned and operated. That's what makes K5 really stand out, even in South Africa. Why is that unique here, in a majority black population country?

KEKANA: I think because aviation is (inaudible) new. It's a developing sector. So, you know, a company like this wouldn't have existed prior to 1994. It wouldn't have been allowed to exist prior to 1994.

You know, at the moment, I think we're probably the only one. I think we're one of a handful at one stage, but the recession hit quite a few of us pretty hard. And we also just literally hung in there. But you know, we're still standing, which is good, and we're continuing to grow. So that's, you know, that's what's important.

BARNETT: But it says something about the state of aviation in southern Africa, if a 100 percent black-owned and operated aviation charter company is unique in a country with a majority black population.

KEKANA: But you must understand, when we promote ourselves as a company, we promote ourselves as a general aviation company offering a service. We don't promote ourselves as that black company offering a service. We just happen to be black because, you know, my friends and my peers, that's who we are. But yes, we're hoping that what we -- what we're doing will encourage others to follow suit.

BARNETT: You've taken on a number of personal and other initiatives that have -- that has you inspiring other people.

KEKANA: There's still a stigma attached to black aviation in South Africa, specifically if you cross the borders of South Africa, into any of the surrounding countries, aviation in this country is black. All your pilots are black. Your HTs that are owned are owned by black business men or, you know, but it's only in South Africa where it's still predominantly white.

So you know, we try to -- try to change that and see what we can do to kind of balance the numbers a little and make it accessible to everybody (inaudible) travel to schools and what's saddened me is that even as far as 10 years into democracy, kids were still saying to me, well, we didn't know that we could get involved in aviation.

And I'll say, but, why would you say something like that? And they'll say, well, whenever they look at airports or airplanes or anything in South Africa that involves aviation, all they see are white faces. So as far as they're concerned, aviation is for whites only. And that's the terminology that the youngsters would use.

I'm like, absolutely not. You know, I stand there with my stripes and my wings and say, look, you know, and my silly cap, you know, you can do it. If I can do it, you can do it. I mean, I'm just as South African as you are and, you know, I grew up here. I'm not from anywhere else. And you know, I managed to end up in the industry.

BARNETT: So from a financial perspective, how are your books looking these days?

KEKANA: The last couple of years were really, really tough. And it's not just for us; it's for aviation across the world. And like the Western countries, where we find that there's regression, or recession, with us, Africa is still a developing market.

I mean, we have South Africa and Angola and Nigeria, all -- and Botswana, all very large, wealthy, active growing markets. So and a lot of the countries are inaccessible by road. So the only way to get there is by air. And so the potential is there. (Inaudible). And we're still there.

BARNETT: But Ernest, at 35 years old, which is relatively young to be in this kind of position, you've got lots of time left. So how far are you going to take this?

KEKANA: We've just cut our teeth with the charter sites. The next will be the schedule market. That's where we -- that's where we're headed.

BARNETT: Do you hope there are more black South -- black Africans who have an ambition and say, I can now achieve something in a field where I previously thought I couldn't?

KEKANA: Yes, (inaudible). And I can tell you we get emails. I've even had written letters from persons from different countries across the continent, saying, listen, great job; you've inspired us. So when you have your bad days, when you think, you know, what am I doing? Again, we all have it. And there's no CEO in the world that would turn around and say, ah, I never have that. Please, me?

No, everybody goes through those periods. And you start to think about, you know, well, there's this person that wrote you a letter and there's this person that sent you an email and there's this person that wants to be part of aviation and this is what you're doing. So you know, stick at it and you slowly charge yourself up and you say, right, let's hit it.

And then, you know, get a good night's rest or whatever it is you need and then the next day, you're back at it again, saying, right, what can we do? Who can we phone? Where can we get our funding next, you know? If we're not getting it from this person then -- and so the drive continues.


CURNOW: That was pilot and business man Ernest Kekana.

Well, that's all for me, Robyn Curnow. Please do join us again next week. In the meantime, go online. We're at Goodbye.