NSSF risks losing billions in property deals, says Auditor

Thursday, September 12th, 2019 00:00 |
An aerial view of Nyayo Estate in Embakasi, Nairobi. Photo/PD/FILE

Mercy Mwai and Anthony Mwangi

In a tale of vicious fraud that has dogged the National Social Security Fund (NSSF) for decades, pensioners risk losing billions of shillings in irregular sale of houses and land belonging to the pensions fund.

A report tabled by the Auditor General in the National Assembly yesterday shows that the cost of the fund’s various housing projects was hiked to Sh6.2 billion up from the initial Sh5.5 billion in the 2016/17 financial year. 

“The statement of net assets reflects a balance of Sh6,203, 801, 502 in respect of assets under construction which was an increase from Sh5,550,052,554 in 2016/17 after re-valuation carried out during the year under audit,” says the report.

The auditor also raises queries over  more than Sh3.7 billion expected proceeds from the sale of the housing projects, but has yet to be realised because some of the houses were undersold.

The report says Milimani executive apartments in Nairobi, Hazina Plaza Mombasa, Nyayo Estate Embakasi, as well as Hazina Trade Centre were sold below their market prices.

It also queries the disposal and transfer of undeveloped lands in Mavoko and Upper Hill in Nairobi respectively.

With respect to Milimani executive apartments in Nairobi, the Auditor General says the NSSF has only been able to realise sales worth Sh753.5 million as opposed to the projected Sh3.6 billion — a shortfall of about Sh2.9 billion.

The report says the board had approved two categories of sales — the three 94-bedroom units with DSQ to be sold at Sh35 million each and 10 three-bedroom units without a DSQ at Sh31 million each.

It also projected to construct five blocks of 104 spacious apartments at Sh2.6 billion, but the contractor, Chang Foreign Engineering Company, abandoned the project after doing pre-measured works at cost of Sh1.69 billion.

The Auditor General also queries the payment of Sh215.5 million for the stalled Sh2.1 billion Nyayo Embakasi Phase Six project in which the contractor, China Jiangxi International, was to put up 324 units. 

The construction works signed in February 2013 was to take 78 weeks from June 2, 2013 to November 30, 2014 but as at March 27, 2018, only 44 units had been constructed.

 “By the time of the stoppage, the contractor had been paid an advance fee of Sh215, 540,722 against a bank guarantee from the Standard Chartered Bank which expired on September 30, 2015. In the circumstance the fund risks losing Sh215, 540,744 already paid,” said the report.

On the leasing of nine-storey Hazina Towers formerly known as Polana Hotel, a four-star facility, at a cost of Sh450 million at an annual rent of Sh60 million, the Auditor General indicates that the fund is yet to realise its return on investment since 1994.

According to the report, despite millions of shillings being pumped into the project, the hotel remained closed since 2001 when the tenant failed to pay rent, adding that to date only Sh66.5 million had been realised from the lease.

The Auditor General said attempts to lease the building in 2009 at Sh300 million failed because bids received were far below the reserve price. 

A lease given to Techno Holdings at a monthly rate of Sh2.25 million translating to Sh27 million annually flopped after the tenants were kicked out through a court order leaving the building vandalised.

In Kisumu, the report says the swapping of Milimani upmarket houses to offset Sh150 million debt owed to NSSF by the then Municipal council is questionable as the land on which the houses stand is currently valued at Sh178 million.

Within the land is a flat comprising eight two-bedroom apartments and three three-bedroom maisonettes with a servants quarters.

The houses are currently rented out to NSSF officers at Sh9,000 and Sh7,500 for apartments and maisonettes respectively. The fund earns Sh900,000 in rent from the property.

The Auditor General further says the fund’s land in Nairobi’s Upper Hill area measuring 0.2 hectares purchased in 1996 at a cost of Sh20 million was irregularly revoked and reallocated to the Judiciary.

A piece of land measuring 69 acres in Mavoko was subdivided into seven plots of 9.8 acres and disposed of at Sh18 million each.

The plots were later sold to AMS Properties Limited on the basis of an agreement at a cost of cost of Sh126 million.

However, only Sh12.6 million or 10 per cent was paid with the balance of Sh113.4 million which was paid within 90 days from the date of execution of the agreement still outstanding.

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