DESPITE concerns that Botswana-based property mogul, Gulaam Husain Abdoola of GH Group sold Mlimani City property to another Botswana firm, Turnstar Holdings Limited of which he is also the founder at a lower price, the new investor is seeking further tax exemptions.
GH Group which sold Mlimani City property to Turnstar Holdings in 2011 at 77 million US dollars (over 125.08bn/-) which many local real estate experts are questioning, has Abdoola as one of its founder alongside his wife, Hawa Abdoola.
The Group allegedly spent 80 million US dollars (over 129.95bn/-) to put up Mlimani City in 2004/5 with tax exemptions allowing it to bring in foreign cash and deemed capital goods tax free.
But now local experts are questioning the sale deal which Abdoola who is also a founder shareholder at Turnstar Holdings, has undertaken with the University of Dar es Salaam's approval. "Gulaam is indeed a director of Turnstar and when this transaction was done, his interests were declared and the transaction approved by a shareholder vote," the company said in a statement delivered to 'Daily News on Saturday' by Mlimani City Holdings Assets Manager, Marilyn Mosha.
The statement further noted that Abdoola is still a non-executive director of Mlimani Holdings who earns fees charged withholding tax stressing that as a listed company at Botswana Stock Exchange, Turnstar Holdings observed all applicable rules and regulations.
Local real estate experts argue that Mlimani City's actual market price is well above 100 million US dollars pointing out that since Abdoola and Turnstar are closely related, more money might have changed hands in Gaberone to avoid the local taxman and partner.
But still, development has stalled at Mlimani City since 2009 when tax exemptions offered in 2004/5 expired and now the new owners are demanding another tax extension. The new investor has already secured an income tax waiver on foreign loans after parliament enacted Finance Act of 2012.
"We have already drawn up plans for the development on the remaining land but are still awaiting fulfillment of obligations due on the part of the government," Turnstar's statement said, noting that the hotel, office block and botanic garden are new features to be added to the project while an extension will be done on the shopping mall.
"Basically all of their demands have been addressed but now we are simply waiting for gazetting of the changes," said Tanzania Investment Centre (TIC) acting Executive Director, Raymond Mbilinyi. Mr Mbilinyi defended the decision to grant Mlimani City Holding (MCH) more tax relief saying the government is committed to encourage foreign direct investment flow into the country.
Turnstar Holdings is also requesting 10 per cent import duty waiver on deemed capital goods including vehicles. "Mlimani City project is a model of a Public Private Partnership (PPP) and benefits both the foreign investor and University of Dar es Salaam," argued Mr Mbilinyi who referred this paper to UDSM Acting Vice-Chancellor responsible for academic affairs, Professor Florens Luoga for further clarifications.
Prof Luoga demanded written questions from 'Daily News on Saturday' which until we went to press yesterday had not been responded to. According to Botswana Stock Exchange, Turnstar Holdings' earnings after the first six months since acquiring Mlimani City in February 2012, increased by 35 per cent.
"The new Tanzanian acquisition has lifted the property titan's interim earnings, contributing P30.8 million (over 6.04bn/-) or 35 per cent of revenues for the period," said a report from the BSE dated July 2012.
The report said Turnstar's revenues of P87.1 million (about 17.56bn/-) for the six months ended July, 31, 2012, with its local operations contributing about P56.3 million Botswana local currency (about 11.35bn/-) of the sum. Tanzania Revenue Authority (TRA) Commissioner General, Harry Kitillya said the authority is investigating the case to determine whether there is any violation of local tax regulations.