How Sh653m taxpayers’ cash was squandered 

Pension fund NSSF has paid Sh653 million in compensation to a Chinese contractor for idle time after work stalled on its controversial Hazina Trading Centre project in Nairobi.

A fresh report by Auditor-General Nancy Gathungu shows that the contractor, M/S China Jiangxi, is demanding a total of Sh871 million, in a case that could cost millions of workers toiling to fund the NSSF about Sh1 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,” the January 26 audit report says. 

“Expenditure records indicated that payments totalling Sh653,772,843 were made in respect of the claim.”

But Ms Gathungu says NSSF did not explain why work stopped on the project, calling the compensation an “ineffective use of public resources”.

The Hazina Trading Centre has cost Kenyan workers at least Sh4 billion.

Delayed project

The building, whose construction began in 2013, was initially meant to rise 39 floors and rule the Nairobi skyline and be completed by the end by 2016. 

But work stoppages due to court cases among contractors, tenants and the authorities delayed the project, and a decade later, it has not been completed.

Ms Gathungu reported that by December 2020, the building was 80 per cent complete.

She said that while “its scope was reduced by 21 floors, equivalent to 58 percent of the original contract, the cost was reduced by Sh2.6 billion (or 39 percent)”.

Ms Gathungu’s argument brings an independent view, showing that had NSSF reviewed the project’s cost downwards by levels equal to the works (by 58 percent), the cost would have come down to Sh2.8 billion. This would imply that in the review of works, workers lost Sh1.2 billion.

Completion date

The report says that workers stand to lose Sh2.1 billion if the full Sh871 million is paid to the Chinese firm.

“The project has had a number of completion date extensions with the most recent set for December 2020 which, however, lapsed before the works were completed,” the report says. 

“As of the time of the audit, 11 certificates valued at Sh3.7 billion in aggregate (or 83 percent) of contract sum, had been paid. However, a physical inspection of the project indicated that the works were only 80 percent complete. 

“Therefore, there was a risk of the project exceeding its budgeted cost amounting to Sh4,095,862,434.”
Besides the Hazina Trading Centre project, the Auditor-General also cast doubt on the future and stability of NSSF, reporting that nearly half of its workforce constitutes ageing employees who are almost retiring.

“(A) Review of employee records indicated that out of the 1,261 staff, 41 percent were about to retire after serving their respective terms. As a result, the Fund’s prospects for maintaining a stable, experienced workforce that would enable it to attain its goals and objectives may be at risk,” the report warns.