NSSF seeks to revive two controversial real estate projects

The National Social Security Fund (NSSF) has invited fresh tenders for two controversial real estate projects linked to the sacking of its managing trustee three months ago.

The fund on Thursday placed an international joint venture tender for the construction of a 62-storey tower on its plot on Kenyatta Avenue, Nairobi at an estimated cost of Sh20 billion. NSSF has also invited tenders for the construction of a Sh80 billion residential city in Mavoko, Machakos County.

The projects were among the reasons Labour secretary Kazungu Kambi cited when he sacked former managing trustee Tom Odongo, accusing him of sharing the investment plan with the media without his knowledge (read article).

Mr Kambi thereafter cancelled all NSSF’s pending tenders and ordered an audit of all contracts that had been awarded.

The list of projects affected by the declaration includes the Sh6.7 billion extension of Hazina Towers to 39 floors and construction of 100 apartments on State House Road, Nairobi, dubbed Milimani Apartments.

Mr Kambi on Thursday insisted that the newly advertised tenders were not among those that were to be subjected to the Efficiency Monitoring Unit (EMU) audit or whose execution he had frozen.

“I only ordered for an investigation into projects such as Hazina and not the two (Kenyatta Avenue and Mavoko) real estate projects,” Mr Kambi said in a telephone interview with the Business Daily.

“The only issue with the two projects is that the tendering process was not done properly,” he added while declining to expound on the matter.

The minister, however, said the EMU report was ready and was being used in the ongoing court battle against Mr Odongo. Mr Odongo is contesting his dismissal from the fund, saying it was irregular.

Mr Odongo first shared the details of the CBD and Mavoko projects with the Business Daily in July, saying that NSSF intended to take up between 10 per cent and 30 per cent of the Sh100 billion joint venture projects.

(READ: NSSF lines up Sh100bn real estate projects)

The fund’s share of the total cost was to ensure its investments in real estate stay below the maximum regulatory limit of 30 per cent of total assets set by the Retirements Benefits Authority (RBA). Mr Kambi’s affidavit in court accuses Mr Odongo of telling the media of NSSF’s intention to list its real estate investments at the Nairobi bourse.

Mr Odongo is also accused of revealing plans to invest Sh100 billion in real estate and for sharing plans on the intention to increase workers’ contribution to a maximum of Sh18,450 monthly from Sh400 as proposed in a new Bill.

“For the last few months, I have been greatly troubled by the actions of the claimant and despite repeated requests, caution and advice, the claimant declined to rectify the wayward attributes,” Mr Kambi says, citing Mr Odongo’s interviews with the media between July 16 and July 19, 2013.

Determination of the case is only two weeks away and the fund, which is being led by Hope Mwashumbe in an acting capacity, is stepping ahead to float the tenders.

NSSF management declined to respond to queries on the matter referring all questions to Mr Kambi.

A source familiar with the plans, however, said the 30,000 housing units in Mavoko will be built in eight phases and will include one to five-bedroom units, a shopping centre, recreational facilities and a school. The workers’ retirement fund owns 960 acres of land in Mavoko valued at about Sh2 billion.

The 62-storey tower to be built on Nairobi’s Kenyatta Avenue will host malls on the first three floors, a five-star hotel, rental apartments, office blocks as well as 12-storey parking lots.

“The two projects have been on the back burner for six years and it is high time they were implemented,” said a source at the fund who declined to be quoted for this story.

“NSSF’s intention is to enter into deals with private sector players to build and sell residential and the commercial property. The fund cannot hold onto them since this would negatively affect our investment portfolio.”

The pension funds manager is no stranger to controversy in as far as the management of investments is concerned. NSSF, whose membership as of June 2011 stood at over 4.2 million, had a portfolio of Sh126 billion.

The fund has undeveloped land and plots portfolio of 16 properties valued at more than Sh8.6 billion and significant investment in companies such as EAPCC at the Nairobi Securities Exchange.

The fund’s quest to diversify its revenue sources has seen it invest in different sectors — hence the plan to list the properties at the NSE and build houses preferably for sale.

NSSF has in the past seen such plans, including the recent cancellation and freezing of tenders for extension work on Hazina Trade Centre, falter. The project was commissioned in June only for it to stall a month later, further delaying the realisation of the Sh100 million in lease income that NSSF expects from the property once it is completed.

The contract was for months mired in controversy after it was initially awarded to a Kenyan firm, Cementer Limited for Sh6 billion but later moved to China Wu Yi, said to have been the lowest bidder with a price Sh5.9 billion.

China Wu Yi and China Jiangxi had challenged the award of the contract to Cementer in court, causing the judge to rule in the latter’s favour.

The fund had planned to sell Hazina Towers and View Park Towers in June last year for Sh3.5 billion but the process stalled on grounds that the tender documents did not have full details of the lease owners.

NSSF spent Sh5.2 billion of the Sh6.8 billion it collected in 2011 on administration, raising questions on its spending. In contrast, the pay-out to its membership dropped to Sh1.7 billion from Sh2.2 billion the previous year.

The fund has also come under scrutiny for paying off millions of shillings in controversial Moi-era transactions. Mugoya Construction and Engineering Company (Sh390 million) tops the list of beneficiaries.