Sh653m NSSF's idle fees returns to haunt Chinese firm

A Chinese contractor is at the centre of a parliamentary probe over Sh653.8 million in questionable compensation claims and the scaling down of a building project in Nairobi by the National Social Security Fund (NSSF) from 36 to 15 floors.

The probe of China Jiangxi International Kenya Limited has been initiated on the strength of an audit report that shows that the Hazina Trade Centre (HTC) project in the city’s central business district was scaled down to 15 floors with no significant reduction in contract price and no clear paperwork explaining the variation.

This means that the project scope was reduced by 21 floors, equivalent to 58 percent of the original contract, whereas the cost was reduced by Sh2.62 billion or 39 percent from Sh6.72 billion to Sh4.1 billion.

The Chinese contractor has also been fingered by the National Assembly Public Investments Committee on Social Services, Administration and Agriculture (PIC- SSAA) for declining to refund the NSSF some Sh215.5 million it pocketed in mobilisation fees for the construction of a housing project in Embakasi.

China Jiangxi International Kenya Managing Director Jimmy Ji appeared before the parliamentary watchdog committee to respond to the issues raised in the reports of the Auditor-General on the accounts of NSSF for the financial years 2019/20 and 2020/21 but remained tightlipped, prompting the committee to wonder whether he was a genuine official of the company.

“When we look at the documents you have presented to us we see jokers,” Navakholo MP Emanuel Wangwe, who is the chairman of the parliamentary watchdog committee, told Mr Ji. “We even don’t know whether you are a genuine witness before this committee because you don’t portray the image of a serious company.”

Mr Ji was asked to present a written submission on the issues raised by the Auditor-General, Nancy Gathungu.

“We will not waste time with you. The reason we have a police station within Parliament buildings is for people like you. Let me remind you that we are here to protect public funds by ensuring their prudent use,” Mr Wangwe told Mr Ji.

According to the audit report, the company was awarded a Sh6.72 billion contract for the construction works of the Hazina Trade Centre.

The project entailed the elevation of the then-existing building into a 36-floor tower, which would have been the tallest building in the country.

Read: 15-floor Hazina Trade Centre to cost Sh4bn

Currently, the CBE Tower in Addis Ababa- the headquarters of the Commercial Bank of Ethiopia- with a height of 209 meters and 53 floors is the tallest building in East Africa.

However, the Hazina Trade Centre project was scaled down to 15 floors at a reduced contract of Sh4.1 billion.

Physical inspection of the project indicated that the works were only 80 percent complete with a review of the project records indicating that the contractor filed compensation claims amounting to Sh871.7 million citing idle time arising from work stoppages.

The expenditure records provided to the committee indicate that the Chinese company was paid Sh653.8 million in respect of the compensation claim.

The committee also heard that the Chinese company was awarded a Sh2.2 billion contract for the construction of the Nyayo Embakasi Estate phase VI project. The contract was to take 78 weeks from June 2, 2013.

However, the project stalled after Nairobi county government declined to grant the requisite change of user approvals for the plots meant for development.

This prompted NSSF to request the contractor to refund Sh215.5 million it was advanced in project mobilisation fees but the contractor declined.

The committee has now demanded that the contractor provide the contractual agreement it entered with the NSSF for the construction works of the Hazina Trade Centre.

In so doing, the Chinese firm is required to include the award and the acceptance letters for the project before and after scaling down the floors from 36 to 15 floors.

The committee also wants the foreign company to submit the letter from NSSF that “instructed you to scale down the floors at a reduced contract sum of Sh4.1 billion” as well as the total amount it received from the NSSF on the Hazina Trade Centre project.

The MPs also want to be apprised of the Hazina Trade Centre project and the “circumstances surrounding the compensation claims.”

Read: Chinese firm hits NSSF with Sh243m claim for pay delays

The committee further wants the foreign firm to provide the contractual agreement for the construction of the Nyayo Embakasi Estate phase VI project including the award and the acceptance letters for the project.

The Chinese firm is also required to explain why it has declined to pay NSSF the project mobilization fees of Sh215.5 “that was advanced to you.”

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