Gulaam Abdoola bullish about growing Turnstar

Group Managing Director of Turnstar Holdings Limited, Gulaam Abdoola, describes himself as optimistic as he reveals his ambitions of increasing the company’s investment property value to over P3 billion in the next three years. Abdoola’s interview with The Business Weekly & Review comes just after the Botswana Stock Exchange (BSE) listed outfit released its financial results for the year ended 31 st January 2023. During the period under review, Turnstar’s investment property value grew by over P100 million from the previous corresponding period to sit at over P2.5 billion. [ihc-hide-content ihc_mb_type="show" ihc_mb_who="1,2,3,4" ihc_mb_template="1" ] “We are extremely pleased with the results Turnstar is producing as we know Turnstar is an old company with a solid foundation, good fundamentals, low debt and has always given its shareholders returns year in and year out,” he says. Group revenue grew by 19 percent to slightly sit above P294 million while total comprehensive income attributable to shareholders grew to P183 million, compared to the P142 million reported during the 2022 financial year. Abdoola describes the performance as solid, although he says the results could have been better. Interest rates “Our results, of course, could have been much better,” he says. “You will notice from the financials that the increase in interest rates worldwide had a huge impact on results. But this would have affected all businesses, not only Turnstar, as it is a general trend out there currently.” He adds that he keeps navigating how to grow the company amid the economic headwinds. “My intention is for Turnstar to remain stable and keep paying dividends for generations to come,” he says assertively. Abdoola acknowledges that there are challenges in the property market where development opportunities are available but only to a certain extent. “Demand for property development is not that high since our market is extremely small because of the population,” he points out. “Unemployment is also high, so the disposable income of families has dropped substantially and spending has become tight.” Unfortunately, he observes, this is a challenge that Botswana will continue to face for some time because there is no easy fix for it. Even so, Abdoola is determined to grow Turnstar. When he established Turnstar Holdings as a public company years ago, the idea was for him, through his company GH Group, to identify and develop properties which would be sold to Turnstar after board approval. Over 80 percent of the Turnstar portfolio currently consists of properties bought from Abdoola directly. Properties acquired outside GH Group from companies like BIFM are few. A pipeline of properties “I do have a plan for Turnstar to reach the target of the P3 billion asset value. I have a pipeline of properties for Turnstar to consider. But they will first have to be assessed by the investment committee, then go to the audit committee. If those committees are happy. then it will go to the board for approval,” he says. To that end, Turnstar is currently exploring properties offered to it by Abdoola and other developers in the market interested in selling to Turnstar. Adboola says while there is an attractive pipeline of properties, the cost of development remains a concern. He notes that after the Russia–Ukraine conflict broke out, prices of raw material became ridiculously high while, “sadly,” rentals in Botswana are quite low comparatively. This presents a challenge to match property development costs and still maintain a decent return. Another challenge that Abdoola points out is high bank interest rates, which make the cost of borrowing to finance acquisition and property development expensive. “In some cases, the interest rates are even higher than the return on the property,” he asserts. But these challenges do not deter Abdoola who says there is no short-term solution for them and therefore what is needed is a long-term plan is to create a long-lasting shareholder value. “What we have decided to do, which of course will go through some discussions with the board and other stakeholders, is raise funding of about P400 million to fund these acquisitions in the next three years,” he reveals, adding that he has already informed the board about this. Asset value After these proposed acquisitions, he would like to discuss with shareholders and stakeholders having a certain policy for the next 5 to 7 years to retain certain income and settle a portion of the bank debt annually. Abdoola explains that in lieu of cash dividends not paid out with issued linked units for those years, Turnstar would in that way not create a dilution to existing shareholders. As a result, the asset value of the shares will grow. “If, for example, we retain P60 million from the profits and pay it to the bank, the savings of the interest of that P60 million would reflect as profit in the next reporting period, which keeps increasing the profit,” he explains. These are some of the long-term sustainable solutions that Abdoola believes are good for business. “I am bullish about growing Turnstar,” he says. “We are all very enthusiastic as the management and the board. We have a great board of directors who are independent thinkers who add a lot of value to strategic direction,” says the man who is confident that Turnstar will remain Botswana’s largest property company by value, listed on the BSE. Economic challenges Like any other business, Turnstar generally faces challenges in the Botswana economy. Abdoola speaks of Botswana’s small population as a major one because it limits economic activity and growth, which affects job creation and citizen empowerment. “The government has the right intentions in pushing for citizen empowerment and protecting citizens in their businesses by giving them a right to grow. However, making policies without thinking the whole plan through can be disadvantageous,” Abdoola says, adding that the best way to empower small indigenous citizens is to give them a vibrant market to operate. He believes it is fruitless to encourage citizens to operate in a market and try to make a profit while the doing business environment is not conducive. “It is quiet now. The spending capacity is low while the pie is being shared all the time by the same people,” he states. According to Abdoola, Botswana needs to have a long-term systematic immigration policy to aggressively bring in between 500 000 and 1 million people into this country. This is necessary strategically to grow the population, accelerate economic activity and increase spending to achieve a vibrant economy. Red tape “We need people. Policymakers need to open their minds and understand that foreigners do not come and take things away from locals. It is a complete misconception. Citizen businesspeople need a chance to prosper in a vibrant economy and it is the government’s responsibility to create it,” he says, adding that there are instead more regulations and red tape constraining doing business in Botswana, resulting in the country dropping in terms of the doing business rankings. “We all know the government is not capable of creating employment and that only the private sector can,” says Abdoola. “The private sector is willing to create jobs expand businesses and further invest. However, it can only do that in a vibrant economy.” As a matter of fact, Abdoola says, businesspeople are frustrated but silent in the face of regressive legislation and red tape. “I am not criticising the government,” he notes. “All am saying is that growing the economy is a partnership between the private sector and the government. The government needs to provide the right tools for the private sector to flourish. The government has drawn a very distinct line between business and itself, which I think is a shortsighted approach. “Botswana’s competitive advantage lies in three fundamental things which are dear to investors. These are economic stability, which we have because of democracy. We also have an independent judiciary. Foreign investors also prefer free flow of foreign exchange, which most countries do not have. “The problem is that after ticking major boxes, investors on the ground experience land unavailability, high costs of utilities, challenges in getting skills personnel into Botswana and work and residence permits, which are impediments to foreign direct investment.” While it must be clear to the investors that they must prioritise citizen employment, they should also be allowed a certain percentage of their preferred skilled personnel in order to produce at maximum capacity. “For me, Botswana is one of the best countries in the world,” says Abdoola. “I would like us to prosper. We have the right fundamentals and everything, but we just cannot get together to attract the needed FDI and prosper.” [/ihc-hide-content]

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