How NSSF's dream of 39-storey trade centre came crashing down

Hazina Trade Centre. Construction began in 1997. [Courtesy]

Standing at 180 metres upon completion, the Hazina Trade Centre was anticipated to be the tallest building in Kenya and the third tallest in Africa, following the Carlton Centre in South Africa and the Cairo Tower in Egypt. 

With an artistic impression symbolising a Maasai moran standing with his legs crossed and leaning on a spear, construction began in 1997 with an estimated cost of about Sh2 billion. 

However, 27 years later, the building stands at only 15 floors, with about two-thirds of the original architectural vision reduced to a bland form similar to the surrounding buildings.

The contractor indicates that the project is complete and ready to be handed over to the owner, the National Social Security Fund (NSSF). However, the building, located between Moktah Daddah and Monrovia streets in Nairobi’s Central Business District (CBD), is now under scrutiny over fraudulent payments.

A Chinese contractor has been put on the spot over alleged fraudulent payments and the reduction of the proposed office block.

While appearing before the National Assembly’s Public Investment Committee, representatives from China Jiangxi International Ltd were tasked to explain why the office block was reduced from the initial 36 floors to 15 floors. The Navakholo MP Emmanuel Wangwe led the committee summed the contractor to provide further additional evidence concerning the issues raised by the Auditor General in the NSSF accounts for the financial years 2019-2020 and 2020-2021.

Wangwe on Tuesday noted the peculiarity that building 15 floors ended up costing more than the initially planned floors, despite the project involving the elevation of an existing building.

The legislator emphasized that such a variation should not result in a 100 per cent cost increase. “What made the 15 floors more expensive than building the revised 21 floors? Even if there were variations, it cannot be 100 per cent,” questioned Wangwe.

The committee questioned the rationale behind the drastic reduction from 36 floors to 15 floors, especially since the work was in progress and the Bill of Quantities (BQs) was prepared for the 36 floors. The committee sought to know if the BQs had to be revised due to the variation. According to the committee, there needs to be an explanation of why excess funds were paid for work not completed, suggesting that the variation led to an overinvestment in the project.

But Jimmy Ji, the director of China Jiangxi International Ltd told the committee they were on the site only to build and were not involved in the decisions on the variations.

A section of Hazina Trade Centre. [David Njaaga, Standard]

“We are contractors and not involved in the decision-making of the variations. We are just on-site for construction purposes, and when the decision of variation was reached, we were building the 15th floor,” Mr Ji said.

How did we get here?

In 1994, Kenya’s economy was liberalising, and shares in State firms such as Kenya Airways and Kenya Power floated to the public.

Kisumu Governor Anyang’ Nyong’o, then an MP tabled 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, this House must get fully informed about the status of the public corporations and some of the salient issues relating to liberalisation and privatisation,” he said.

Here, 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 without signing the tender documents.

It had also sold land to private individuals who sold it back to the State at exorbitant prices, with the fund having shelled out about Sh650 million irregularly over two years. But a much bigger con job was in the offing.

That year, the NSSF board conceptualised the Hazina Trade Centre, a 39-floor business complex in the heart of Nairobi’s CBD 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.

In 2020, 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 (PIC).

“When construction of the building was on the 15th floor, that is the time they realised that they could not go up to the 39th floor. That clearly shows that no feasibility study or due diligence was done.”

The committee said when the project was being reviewed, it was supposed to cost taxpayers almost Sh2 billion at 36 floors. 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 that seemingly appeared an end to the grand dreams.

Retail chain Nakumatt then 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.

Lawsuits

The decision was, however, challenged by the two Chinese firms that had lost the bid to Cementers.

China Jiangxi International Country Director Jimmy Ji before the National Assembly's Public Investments Committee on April 17, 2024. [Boniface Okendo, Standard]

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 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 a 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. After the retailer obtained an injunction stopping construction, City Hall said work would only resume after the contractor undertook a fresh environmental impact assessment and received fresh approvals from the National Environmental Management Authority (Nema).

City Hall’s Department of Public Works in 2016 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.

In 2017, the NSSF Board of Trustees said during the annual general meeting that it would finish off the building on 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. Another report by PIC, however, noted that the penalty was later reduced to Sh1.89 billion.

Governor Abdulswamwad Nassir, then Mvita MP and chairman of the PIC said 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. We looked at the variance the contractor had given and it was too high, so we put a stop to it,” he told Real Estate in an interview.

Nassir said by the time they went for a site visit, they found that even the public works assessment had not been done.

[Additional reporting by Frankline Sunday and Macharia Kamau]