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| Prof Luoga |
Answer: The University of Dar es Salaam does not hold any
shares in MHL. Being an institution that is controlled by trust laws, it cannot
invest in a private company unless certain stringent conditions are met.
In any case, it was not found efficient to conduct the
public-private-partnership (PPP) venture through the joint venture mode. Risks
would be very high and the university would be exposed to sharing losses.
Q: Is it true that revenue sharing is 80 against 20 per cent
for Turnstar and UDSM respectively?
A: UDSM and Turnstar cannot have any sharing arrangement
because they are not parties to any agreement. The relationship of UDSM in
respect of Mlimani City is restricted to MHL. The latter has obligations to
account for turnover to UDSM and make monthly remittances to UDSM at agreed
rates.
Q: Turnstar bought a controlling stake at GH Group which has
a controlling stake at MHL that jointly owns Mlimani City with UDSM, now I am
wondering why is a USD 80m facility which is a going concern be sold for USD
77m even if it’s only the rights and not land sold?
A: It is a misconception to say that UDSM jointly owns
Mlimani City with MHL. UDSM is the owner of Mlimani City and has granted long
term management rights over the property to MHL in return for turnover
percentage monthly.
Q: Great, now address the low price which Turnstar paid to
GH Group for Mlimani City?
A: When you refer to the acquisition value of the GH Group
equities by Turnstar, you need to establish the earning per share of the GH
shares at the time of the transaction. This is the basis of the transaction
value.
However, many people are comfortable to make reference to
the property value of the Mlimani City property because it has direct impact in
enhancing the earning per share of GH Group shares. That is the simplistic
explanation of what Turnstar has acquired, but it is not professionally correct.
In that sense therefore, you are surprised that a USD 80m facility which is
going concern be sold for USD 77m, is misconceived.
Q: What does the agreement which the university entered with
GH Group specifically say?
A: First it is not true that UDSM had entered into any
contract with GH Group. At all times the only party with whom UDSM has
contracted with is Mlimani Holdings Limited (MHL). This is a Tanzanian company
whose records are available at BRELA and we advise that you obtain the
up-to-date status of its affairs from BRELA. But, briefly, the majority
shareholder of MHL is GH Group.
Q: Why is Turnstar through MHL seeking an extension to tax
relief after expiry of the 2004/9 exemption period?
A: There have not been any tax exemption granted by the government
to Turnstar and Turnstar have no status in Tanzania to ask for any such
exemption. The only company that has preferential treatment is MHL.
This was accorded some incentives under the Tanzania
Investment Centre (TIC) regime and subsequently the government executed a
Performance Agreement with MHL to grant it some more specific tax incentives,
particularly relating to loan repayments and interest on loans. This
information is verifiable by TIC. It is therefore wrong to assert that Turnstar
are requesting further income tax and import duty exemptions. Turnstar are in
fact implementing nothing in Tanzania and have never been taxpayers in
Tanzania.
Q: GH Group owner Gulaam Abdoola failed to meet his
contractual obligations by not constructing a hotel, office block and botanic
garden during the 2004/9 period, when most tax exemptions applied but now he is
seeking further exemption through Turnstar Holdings where he is also a
shareholder, any explanation?
A: It is not true that Mr Abdoola failed to meet his
contractual obligations. It is not clear which obligations of Mr Abdoola you
are referring to. However, I surmise that you are mixing the centrality of Mr
Abdoola as the individual who has had the drive behind the project and the CEO
of MHL and MHL itself. Be informed that MHL was to implement the project in
three phases. The first phase comprising the construction of the shopping mall.
This is done and you are its physical witness.
The second phase was the construction of the residential
houses and the office blocks. You will agree that these obligations were duly
discharged to satisfaction. Kindly be informed that during this stage the
President of the United Republic had specifically asked that a high capacity
conference facility be considered and MHL obliged by constructing the Mlimani
City Conference Hall that was not previously planned at this stage.
They, therefore, over performed their initial contractual
undertakings. The third and final phase was the construction of a value mart, a
hotel and a botanical garden. This stage was interfered with at the onset of
the world economic crunch. Banks were no longer ready to continue financing the
project due to the difficulties that beset the financial sector.
Q: So MHL is seeking more time to implement the project
because of the economic crunch?
A: MHL entered into dialogue with both UDSM and the
government on extending the due dates of performance. These were extended by
agreement in order to enable MHL re-arrange its project financing and at the same
time get the government to perform its undertakings under the Performance
Agreement. Not that the government had not performed its undertakings as such,
but there arose lack of clarity on the focus of issues.
Q: Which are such issues?
A: For example, Government Notices were published pursuant
to the Performance Agreement but which were found to have technical defects.
The context of the GNs had to be clarified and the modalities of discharging
the government obligations re-examined. This has taken time because of the
procedural steps that must be observed and adhered to. Perhaps it is this
aspect that is misleading you to think that Turnstar demand further tax
incentives.
Q: What specifically does GH Group or Turnstar through MHL
looking for here apart from tax exemptions?
A: In 2011 MHL requested the approval of UDSM to restructure
the financing for the project. It was agreed that it would be the best
alternative for MHL to raise financing through public offerings. Doing that in
Tanzania would not be feasible.
MHL still does not have the attraction for a successful
listing in Tanzania. After some studies, it was agreed that using a sister
company in the group companies managed by Abdoola, that is Turnstar, it would
be possible to achieve that strategy. Turnstar has been on the Botswana bourse
for a long time and has public goodwill.
It is thus the most viable vehicle for raising funding. UDSM
nevertheless maintained that its contractual arrangement with MHL should never
be interfered with. Hence, in order not to derogate from the UDSM condition,
Turnstar acquired the controlling interest in GH Group and therefore indirectly
over MHL, so that it is legitimate for Turnstar to use the same to enhance its
public standing.
Q: So Mlimani City has not been sold, what did Turnstar buy
from GH Group?
A: In the light of the above, you will notice that it is not
true to say that Mlimani City has been sold. The property at the Mlimani City
project remains with UDSM and cannot be alienated to any person. This is
verifiable at the Ministry of Lands.
The agreement between UDSM and MHL does not entail any sell
of UDSM land. How the Mlimani City Project was packaged as a public private
partnership is currently a subject of learning by many public institutions both
in Tanzania and abroad, particularly the aspect whereby the institution does
not lose ownership of its land and is guaranteed financial returns from day one
of commencement of commercial operations and throughout the entire lifetime of
the agreement.
Source: The Daily News, www.dailynews.co.tz,reported from Dar es Salaam
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