Jirongo’s new demand on Sh40 billion city estate

Lugari MP Cyrus Jirongo has written to the state pension fund seeking to repossess the multi-billion-shilling Hazina estate in Nairobi’s South B over a protracted Sh1.39 billion dispute.

Mr Jirongo, through his company Sololo Outlets, wants to refund the National Social Security Fund (NSSF) Sh1.39 billion he was paid for developing the estate so that he can take full ownership of the property, whose value is conservatively estimated at Sh40 billion.

Hazina estate comprises 400 units of one, two and three bedroom apartments, and three, four and five bedroom maisonettes. The houses were sold to individuals by NSSF at the turn of the century, under the tenant purchase agreement.

Currently a two bedroom apartment goes for Sh6.5 million, a three bedroom one for Sh9 million, while the maisonettes range between Sh15 million and Sh22 million, depending on the size.

Mr Jirongo says the agreement to sell the estate to NSSF has been marred by political interference, negative publicity and bad faith on the part of the board.

“The recent attempts to settle the matter led to a part payment of Sh490 million which has now been embroiled in traditional politics. The public is now being treated to drama on an imaginary scandal,” Mr Jirongo says in his April 11 letter. The letter is copied to Labour minister John Munyes and his Finance counterpart Njeru Githae.

Pulling apart

“We therefore hereby demand that we bring all matters to closure by restoring each party to their original position: give us back our development project in South B and we refund you all the monies ever paid to us totalling Sh1.39 billion. In this way we can stop the acrimonious and chaotic relationship,” he says.

The land originally belonged to Sololo but it was transferred with the property to NSSF, according to documents lodged with Parliament.

The fund contracted Sololo in September 1992 to develop a housing project at Sh1.2 billion financed through PostBank Credit, which has since collapsed.

But NSSF terminated the contract in August 1993, citing breach of the contract terms.

On Saturday, NSSF acting managing trustee, Mr Tom Odongo, declined to comment on the claim.

“The National Social Security Fund wishes to confirm that we have received the petition from Sololo Outlets relating to the Hazina Estate matter.

“At this juncture, we further wish to confirm that we have referred the petition to our legal counsel for further advice,” he said in a statement. Mr Odongo said the Fund would act in the best interests of the public.

“It’s instructive to note that NSSF shall only act in the best interests of our members and indeed that of the Hazina Estate Tenant Purchase Scheme stakeholders.

“Our members should rest assured that NSSF shall at all times vigorously seek to protect the members’ investment interests.”

But, in yet another twist, house owners say they have not been issued with title deeds years after completing the monthly payments.

One of the owners, Mr Kabaki Wamwea, told the Sunday Nation that he completed making his payments in 2002 but was still waiting for his title deed.

“Basically we bought on tenant purchase scheme but it’s supposed to be that when you complete payment, you get the title deed. They have never issued title deeds for any house there. As we speak, there is hardly any documentation apart from the records. You cannot sell or get a mortgage on it. I believe I’m not alone. They have only been making promises about this week and the next for the last nine to 10 years,” Mr Wamwea said.

NSSF public relations manager Christopher Khisa said the title deeds were being processed but did not state when they will be released.

“The documentation for those who have completed payments is being processed,” Mr Khisa said.

The dispute is likely to find its way back to Parliament where NSSF has been on the spotlight over huge payments for contracts dating back to the 1990s.

According to the Public Investments Committee report for 2010, NSSF entered into a contract with Sololo Outlets for the development of Hazina Estate for Sh1.2 billion.

But in 2000, Mr Jirongo went to court demanding Sh4.9 billion for alleged breach of contract. NSSF filed a counterclaim of Sh3.9 billion.

The matter was eventually settled out of court with Mr Jirongo bagging Sh1.39 billion, which he now wants to return.

A letter by NSSF legal officer P.M. Bunde dated January 6, 2012, says Mr Jirongo had agreed to be paid Sh490 million to settle the dispute.

“We are in receipt of a consent dated December 22, 2011, fully and finally settling the above stated matter at Sh490,850,090. The consent further provides that the cost of the suit be awarded to the plaintiffs,” the letter says in part.

A trail of corruption

Mr Jirongo rose to prominence as chairman of the Youth for Kanu ’92, which successfully campaigned for former President Moi’s re-election in the first multi-party elections.

NSSF has been embroiled in scandals for decades and makes a stunning admission on its website.

“Sadly, NSSF’s history has been marred by scandals and ill-conceived investment policies. Indeed, some regrettable investment decisions were made by the Fund in the early and mid 1990s,” reads the statement.

The managers further promise to “prevent the errors of the past from recurring”, with operations “now conducted in an atmosphere of transparency, accountability and with a renewed commitment to efficient delivery of social security services in Kenya”.

But it turns out that they spoke too soon. The Fund risks losing a significant portion of its movable assets over a Sh663 million debt it owes a developer for breach of contract.

Pan Africa Builders and Contractors moved to court in 2003 claiming that NSSF had breached a 1999 contract to develop an estate in Nairobi’s upmarket Kitisuru area through a downgrading process that saw its value drop from Sh1.9 billion to Sh888.4 million.

The matter was in court until July 2008 when the parties agreed to withdraw it in favour of arbitration.

The arbitrators found NSSF breached its obligations to Pan Africa Builders and awarded the developer more than Sh500 million in damages and interest accrued.

But the settlement was disputed by NSSF employees who have since filed a complaint with the Ethics and Anti-Corruption Commission, terming it fraudulent.

Former NSSF Managing Trustee Alex Kazongo — who is on terminal leave — had earlier dismissed claims that the award was fraudulent, saying the board wanted to resolve all pending cases.

Mr Kazongo said the Fund was facing legal claims of more than Sh18 billion and had filed counter-claims worth slightly above the figure.

The cases, some of which have been in court for more than 20 years, have left the Fund highly exposed, raising fears it could have been turned into a cashcow by politicians and their cowboy contractors as was the case in the 1980s and 1990s.

Claims and countersuits

Among the claimants is Mr James Mugoya, the Ugandan billionaire contractor, who sued the Fund over the Embakasi Housing Project.

NSSF says in its latest financial report that Mugoya is claiming Sh7.058 billion against the Fund’s counter-claim of Sh9.8 billion.

It risks losing about Sh2 billion invested in the stock market through Discount Securities, which was placed under statutory management. Top managers of the collapsed stockbroker and senior NSSF officials have since been charged with fraud.

The fund is also estimated to have lost Sh3 billion due to bad investment decisions and doubtful transactions, according to a November 2008 audit conducted by the Inspectorate of State Corporations. (READ- Agency probes NSSF over Sh2.8bn scandal)