The National Social Security Fund (NSSF) was forced to pay a Chinese contractor Sh655.7 million for stoppage of construction work at the Hazina Trade Centre in Nairobi.
This is 75 per cent of the Sh871.7 million that China Jiangxi, the contractor for the 15-floor building, demanded from NSSF, a probe by the Auditor General for the financial year ended June 2020 shows.
Payment for stoppage of works is one of factors that Auditor General Nancy Gathungu noted risked pushing the project beyond its budgeted cost of around Sh4.1 billion.
“Further review of the project’s records indicated that the contractor filed compensation claims valued at Sh871,697,124 citing idle time arising from work stoppages,” said Ms Gathungu, adding that the State-backed pension fund had already settled part of the claim.
“However, no plausible explanations were provided by management for the stoppages, which resulted in ineffective use of public resources.” Extension of Hazina to add more floors started in 2013 but it was not until September last year that the NSSF started advertising for its occupation.
Much of the delay was due to a court injunction in 2014 by Nakumatt Supermarkets, then anchor tenant in the building, which argued that the construction was keeping its customers away.
The retailer lost the case and was ejected in 2017 after accruing rent arrears of Sh73 million.
Initially, the building was to be extended to 36 floors at a cost of Sh6.7 billion. However, this was scaled down to 15 floors, saving pensioners Sh2.6 billion.
Ms Gathungu’s probe also unearthed several gaps in NSSF’s financials including a case where a tenant at Hazina Trade Centre and View Park Towers presented fake banking slips totaling Sh9.33 million “purporting these to have been transacted for rent payments.”
The fund only managed to recover Sh201,550 from the tenant named Kenya College Medicine after auctioning parts of its assets.
“However, additional measures, if any, taken to recover the balance amounting to Sh9,126,077 were not disclosed,” Ms Gathungu said. In total, NSSF is owed Sh770 million in rent arrears.
Some Sh30.6 million is reported to have been collected by various property agents from the fund’s tenants in Nairobi at Bruce House, Hazina Trade Centre, View Park Towers and Nyayo Estate.
However, the money had not been remitted to NSSF, the Auditor General found.
Hazina Plaza-Polana Mombasa, which had first been leased to Azania Hotels for use as a hotel, and which closed in April 2001 with rent arrears amounting to Sh239 million, continued to bleed in the period under review.
Besides, there being no word from management on recovery of the rent arrears from Azania Hotels, the management was once again on the losing end after Techno Holdings Ltd, which had leased the property for 10 years, defaulted on rent amounting to Sh23.49 million.
“The fund sued for recovery of the amount and sought the authority of the court to cancel the tenancy but the sub-tenants at the property demanded compensation for expenditures totaling Sh123 million they claim to have spent on refurbishments and renovations of the property.”
Eventually, NSSF was allowed to eject the lessee and sub-tenants who removed the furniture and décor items they claimed to own.
In the period under review, NSSF raised Sh20.5 billion out of a budgeted revenue of Sh28 billion, with the pension fund citing the effects of Covid-19 in the third and fourth quarters of 2020.