Hazina: How NSSF’s dream of ruling city skies collapsed
THE STANDARD INSIDER
By Frankline Sunday and Macharia Kamau
| September 27th 2020
It started off as a grand development project. The largest building in Kenya and third in the continent with the promise to forever change the country’s skyline.
The artistic impression symbolised a Maasai moran standing with legs crossed, holding a spear.
The building would also have a helipad on the roof and a viewing deck of glass walls giving visitors scenic views of Nairobi from the 39th floor.
Twenty-six years later, the Hazina Trade Centre stands at 15 floors with about two-thirds of the architectural vision shrunk to the bland form of the buildings around it.
The contractor is now giving the building final touches as it readies to hand over the ‘complete’ project to the National Social Security Fund (NSSF).
What happened in the intervening years is the typical story of corruption, with parastatals in charge of billions of taxpayers’ money disenfranchising local developers in favour of deep-pocketed foreigners - and public watchdogs passing the buck.
The year is 1994. Kenya’s economy is liberalising, shares in State firms such as Kenya Airways and Kenya Power floated to the public.
Anyang’ Nyong’o tables a report by the Public Investment Committee on the floor of Parliament with a hyperbolic pronouncement.
“Mr Speaker, I ask for your indulgence if I speak until Jesus Christ comes back precisely because I feel that at this particular time when we are liberalising our economy and privatising the public sector, it is necessary that this House gets fully informed about the status of the public corporations and some of the salient issues relating to liberalisation and privatisation,” he said.
NSSF, the largest pension fund in East Africa, was put on the spot. The corporation had awarded a multi-million-shilling contract to a company to renovate the NSSF House without signing the tender documents.
It had also sold land to private individuals who sold it back to the Government at exorbitant prices.
The fund had shelled out Sh361 million (about Sh650 million today) irregularly over a two-year period.
But a much bigger con job was in the offing.
That year, the NSSF Board of Directors conceptualised the Hazina Trade Centre, a 39-floor business complex in the heart of Nairobi’s Central Business District that was to serve as a revenue stream for the state corporation.
The project was initially set to cost Sh2 billion but this ballooned with time, and billions several times over have been sunk in the construction, with the results far from what was initially drawn.
A report by a National Assembly committee noted that NSSF had from the onset “deliberately and blatantly” refused to involve professionals in the public works.
“They decided on their own to come up with a plan without even conducting a feasibility study,” said the report by the Public Investments Committee.
“When construction of the building was at the 15th floor, that is the time they realised that they could not go up to the 36th floor. That clearly shows that no feasibility study or due diligence were done.”
The committee said when the project was being reviewed, it was supposed to cost the Kenyan taxpayers Sh1.9 billion – almost Sh2 billion. It was supposed to cost that at 36 floors.
“Now they have reduced the project to the 15th floor,” said the report.
Local firm Mruttu and Salman Associates was given the tender to design the building in 1994 and three years later, NSSF broke ground.
Six years later, however, construction stopped at eight floors, with NSSF then saying it was due to financial constraints. It appears that marked the end of the grand dreams.
In the meantime, retail chain Nakumatt moved in, putting up Nakumatt Lifestyle, the first 24-hour supermarket in the CBD.
What followed was either a series of unfortunate or possibly well-orchestrated events with the ultimate goal of swindling pensioners who depend on benefits from NSSF.
The NSSF board agreed to resume construction in August 2010 and shortly after, the fund started the process of searching for a contractor.
It would in 2011 settle for a local company, Cementers Ltd.
The decision was, however, challenged by the two Chinese firms which had lost the bid to Cementers. China Jiangxi International and China Wu Yi lodged a complaint with the Public Procurement Administrative Review Board (PPARB).
The board annulled the contract to Cementers, forcing NSSF to start the search for a contractor all over again.
Cementers had been selected to do the job for Sh6 billion. China Wu Yi had the lowest bid of Sh5.9 billion while China Jiangxi had proposed to complete the building at a cost of Sh6.2 billion.
China Jiangxi won the repeat tender process in 2013 where it was given the job that was expected to cost Sh6.7 billion. It was also expected to do the job in 155 weeks – or about three years.
Cementers – started by Kurji Patel and Laxman Arjan who had honed their skills in multinational construction companies – would in subsequent years claim that the tender process had been designed in such a way that local firms stood no chance.
If anything, the process favoured the Chinese contractors, they said.
China Jiangxi reported on site in August 2013 but would not start work for long when Nakumatt hit NSSF with a lawsuit.
By the time the construction was halted by a court injunction, China Jiangxi had been able to increase the building to 15 floors.
When signing the lease agreement with Nakumatt in 2003, it appears NSSF was not keen on the details and this would come to haunt the project when it restarted construction of the building.
The retailer went to court in 2014 and got an injunction stopping construction, arguing that the heavy machinery and spilling of building materials had resulted in reduction of shoppers and in turn loss of business.
The retailer further wanted NSSF to pay Sh1.63 billion for loss of business.
Nakumatt had a 20-year lease, which would have expired in 2023. It was however faced with financial difficulties that led to it vacating the premises at an earlier date.
The Lifestyle branch was among the outlets that the retailer closed at the height of its problems in 2017.
After Nakumatt obtained an injunction stopping construction, City Hall said work would only resume after the contractor undertook fresh environmental impact assessment and received fresh approvals from the National Environmental Management Authority (Nema).
The then governor Evans Kidero noted that the disruptions to vehicular and human traffic would result in chaos and the contractor had to show how they would manage the traffic.
It is the Department of Public Works that dealt a major blow to the fancy NSSF dreams.
In 2016, the department put the brakes on the project after it was clear that the building was not structurally sound and could not hold the weight of 39 floors.
Its report indicated that it would be unsafe to build above 25 floors as the structure beams were not strong enough to support anything above that.
The following year, the NSSF Board of Trustees said during the annual general meeting that it would finish off the building at the 15th floor and that it had already received approvals from regulators including Nema and City Hall.
Meanwhile, when work stopped following the myriad challenges in 2016, China Jiangxi was claiming Sh2 million a week from NSSF as a penalty for delays.
This at some point rose to Sh6.8 billion – higher than the Sh6.7 billion that NSSF would have paid the firm to complete the 39 floors.
The report by PIC, however, noted that the penalty was later reduced to Sh1.89 billion.
Abdulswamwad Nassir, Mvita MP and current chairman of the PIC told Weekend Business that parliament stepped in at the crucial moment when the taxpayer would have lost even more money owing to the legal dispute.
“Our role as the Public Investment Committee was to establish if there was value for taxpayers’ money and the project did not meet the standards,” he said.
“We looked at the variance the contractor had given and it was too high, so we put a stop to it.”
“When we went to the site we found that even the public works assessment had not been done,” said Mr Nassir.
He, however, declined to comment on the commercial viability of the project or if the Hazina Trade Centre would achieve its objectives given the fact that it had been reduced to less than half of the original design.
“Our concern was the value for money and on that we were able to save the taxpayer Sh6 billion that would have been paid to the contractor. Whether or not it achieves its objectives is not for the PIC to determine,” he said.
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