By Jacob G. Njenga, Department of Civil & Construction Engineering, University of Nairobi
Hazina Trading Center is a building that is owned by the National Social Security Fund (NSSF) whose construction began in the year 1997; however, conceptualization of the project commenced in the year 1994. The building is to be found at the intersection of Monrovia Street and MoktahDaddah streets with the nearest landmark being Jeevanjee Gardens in Nairobi. The intention of putting up the building was to act as an additional fund generator towards the pension fund which had been undertaking several strategic plans with the aim of diversifying its portfolio. The building was intended to go up to 39 stories, making it the tallest building in East and Central Africa and therefore the third tallest building in Africa after Carlton Center and Cairo Towers in South Africa and Egypt respectively. The building was designed to incorporate state of the art architectural features that integrate a Helipad, vegetated roof terrace, a ventilated atrium, and a Nairobi City Viewing gallery.
As a result of financial constraints, construction came to a dead end in 2003 with only eight floors complete, that included, four basements levels which are meant to act as parking space for the facility and can accommodate up to 300 vehicles, a ground floor, two mezzanine and I podium. All were later on leased to local market Retailer Nakumatt Holdings. In 2013, ten years later, when enough money had been raised by the National Social Security Fund, construction resumed, and an extra 31 stories were to be added on top of the existing structure. The entire project was to cost approximately 7.0 billion shillings and once complete; the National Social Security Fund expected a return on investment of 100 million shillings every month in terms of rent.
The construction was to be undertaken by Jiang Xi international after a long-drawn-out legal battle that almost stalled the project as numerous issues arose following accusations that the tender had been awarded irregularly. This is after it emerged that the National Social Security Fund changed some requirements to bid with the aim of locking out local contractors in favor of Chinese ones. For instance, one of the requirements that was introduced required the contractor to have built to the minimum, at least two 40- story buildings within the last five years, something that locked out local contractors automatically for the reason that not a building of such magnitude exists in Kenya.
Cementers Limited had won the initial tender but was annulled by the Public Procurement Oversight Authority (PPOA) upon an appeal that had been launched by two Chinese Firms. When the tender was re-advertised thereafter by NSSF, the above requirement was introduced, and Cementers Limited lost the tender. Jiang Xi International was awarded the tender on 26th February 2013 with a contract period of 155 weeks.
Immediately the contractor got on site and construction began, everything seemed to be going in the right direction and he was certainly going to deliver within the time frame, incidentally when he got on the 15th floor and having accomplished 38% of the work. Nakumatt Supermarket which had leased the property up to 2023 went to court and filed a suit where both NSSF and Jiang Xi International were listed as first and second respondents respectively. A court order against NSSF and any further construction of the Hazina Trade Center by Jiang Xi was issued. In the suit, Nakumatt argued through its lawyer that the development would produce a lot of dust, air and sound pollution that would have considerable effects on its staff and shoppers. To complicate the matter, Nakumatt supermarket claimed that the contractor was dumping materials, wastes and installing machinery such as cranes within the premise hence bringing more nuisances to the supermarket. In addition, Nakumatt claimed compensation amounting to sh.1.6 billion citing loss of business as a result of the ongoing construction which had also led to tenant’s exodus. To illustrate, the number of shoppers visiting the retailer is estimated to have dropped by 37 %. In addition, the supermarket reasoned that owing to the fact that the contractor was about to fence off the premise in adherence to city council by-laws and building regulations, the premise would end up being inaccessible to members of the public consequently harming their business further. Over and above that; the retail chain asked the court to halt the construction until its lease expires in 2023. An injunction in favor of this was issued on 29th of August 2014.
In response to this and as a defense, NSSF argued that the suit was frivolous and a surprise to them for the reason that the agreement that was signed before by the two, provided an allowance that allowed NSSF to put up the remaining floors without any compensation to Nakumatt. Clauses from the lease agreement were quoted to support this. In addition, NSSF told the court that they had undertaken all necessary precautionary measures to protect tenants and shoppers, for instance, by ensuring that any disturbance coming from construction works was the minimum.
This are not the only problems that have faced this building, upon taking office, the Nairobi Governor stopped any further construction on the basis that Nairobi county had not approved the construction of the building, an up to date Environmental Impact Assessment report from the National Environment Management Authority ( NEMA) was demanded by the county. The first report had been done in the year 2006 and hence the need for the assessment to be redone for the reason that Nairobi had undergone a number of changes since then. Moreover, the parking space in the building brought some altercations with Nairobi County in 2015 when the county government demanded 143 million shillings from 83 parking spaces in the facility.
With Hazina Trade Center now stalled by the litigation in court, the National Social Security Fund is on the periphery of losing billions of shillings in terms of claims by the contractor and escalation of costs of materials. To make the matter worse, by the time the work on the project came to an abrupt end, the contractor had already been paid sh. 1.9 billion, an amount that will go down the drain if the current standoff continues. Over and above that, the project can now be described in layman’s language as a dead money investment for the reason that it is not bringing any returns to the pension scheme regardless of the massive investment. It is from this recognition and in awareness of the risk that the taxpayers money has been subjected to that the Public Investment Committee brought to task NSSF management to explain what they were doing to make sure that a decision on this matter was arrived at by the court as first as possible. The committee wondered why a matter that had been filed on the basis of urgency had yet to be finalized several months later.
This is not a one-off unique case in Kenya, where a court ruling has halted an infrastructural project and placed billions of money in terms of investment in Jeopardy. In 2014, months after the construction of the sh.327 billion Standard Gauge Railway line had been commissioned; a court sitting in Machakos County stopped compulsory acquisition of land by the national government from residents of Machakos County.This followed a successful petition by the local Member of Parliament who accused the National Land Commission of failure to inform and notify local residents of such an intention beforehand.
In September 2016, an activist went back to court in protest against the same project seeking to stop the construction of phase 2A, phase 2B and phase 2C which were meant to cover Nairobi- Naivasha, Naivasha- Kisumu, and Kisumu- Malaba respectively. Another vivid illustration was the construction of an interchange at the Bomas of Kenya Nakumatt Galleria Section, Contract No. KURA/001/2011-2012. The interchange had to encroach on private land, something that led to temporary stoppage of the project as the owner had obtained a court order preventing any road work on his ground before full compensation had been done. All the project work was completed, and the contractor left the site having not finalized on this portion.
Although this are some of the few projects that have been affected by court orders, the existence of courts in Kenya cannot be underestimated or seen to work to frustrate the construction sector. The latter is further from the truth for the reason that the justice system on which they operate is the mechanism that is entrusted to uphold the rule of law in the country impartially. Moreover, infrastructural projects in the country that breed disputes should not be treated preferentially in a manner that favors developers for the reason that courts provide a medium to resolve disputes, to test and enforce laws in a way that is fair and rational and void of bias or favoritism. And hence the proposition that justice is a blindfolded figure that balances a set of scales in disregard of anything that could undermine the quest of an ending that is fair and just to all. Infrastructural projects in the country must, therefore, not be treated on exception; they must be implemented apropos to the laws of the state and hence the stoppage of Hazina Trade Center by the Court.
However, there is a need to help developers by ensuring that they are not subjected to cost overruns because of issues that can be avoided. To illustrate, in the case of Hazina Trade Center; with the contractor on site, he must be compensated even if no work is going on. FIDIC conditions of contract, the leading document in many construction projects allows for this, the contractor has already committed his machinery to the project and must be remunerated accordingly. Over and above that, the cost of materials fluctuates with time, and NSSF will have to go above the initial budget to complete this project once the court settles the matter and construction resumes.
The following recommendations are made to protect future projects from stalling because of legal issues. One, There is a need to develop good harmonization between the design and construction stage of any project, this is important to prevent issues of land acquisition from being an afterthought when construction is already underway, a common practice in Kenya. To illustrate, why did the Bomas Interchange land procurement process have to begin when the contractor got on site? Is this not something that could have been done earlier? This is a problem that has been witnessed even in other projects, for instance during the construction of Eastern Bypass where a staggering sh.4.7 billion was paid to landowners as compensation, the same was recently behold in Outer Ring Road construction where sh.3 billion was used to acquire the piece of land between Donholm and Taj Mal roundabout. This can only be realized if the National Land Commission and the ministry of land are brought on board by the relevant road agencies to effect rapid acquisition of road reserves where they have been encroached, and to also assist in land procurement with an appropriate compensation where land genuinely belonging to an individual is to be attained for a project. This will save the government huge amounts of money, land appreciates, and an acquisition not implemented today means that the same acquisition will have to be done tomorrow at a higher cost.
Nakumatt Holdings must have realized a lacuna in the lease contract that enabled them to file the suit even after the National Social Security Fund gave a statement that the lease contract allowed them to continue with the construction without any financial compensation. Although many people castigate the retailer for stalling construction of Africa’s third tallest building, Nakumatt Holdings is a business entity and must, first of all, protect its shareholder’s interests before those of the public. Over and above that, they referred the matter to the custodians of law and order, and the courts decided the case after considering the law and evidence presented. The successful filing of the suit by Nakumatt Holdings brings into question the manner in which the lease agreement was drafted; does it mean that it was not clear in black and white for Nakumatt Holdings to realize right from the beginning, that the structure was meant to continue later without any compensation whatsoever? Moreover, was it still unclear for the courts to realize the same? In the coming days, there is an upright need for developers and developers to be to ensure that the contracts they get into are water tight and fully protect them; this is important if people are to stop using courts cases as a means of frustrating developers. If such was case with Hazina Trading Center, Nairobi Skyline would have already been transformed by now with the emergence of one of the country’s tallest building.
There is a need for the Ministry of Transport in collaboration with the Ministry of Lands to document all Road Reserves in the Country and their condition. This should be done, whether construction for a road has been planned for or not. If people are found to have occupied a road reserve, they should be evicted as soon as possible. This will go a long way towards helping the ministry to salvage a lot of time that is usually squandered when people on Road Reserves have to be given notices to vacate from places that they occupied wrongly in the first place. In some instances, some people have even gone ahead to misuse such generosity and have referred the matter to courts seeking extension of such orders; such actions have gone ahead to derail, affect and delay construction further. It is however; imperative to note that the ministry of transport is on the right track towards this as a bill is underway that will give it the right to bring down all structures in road reserves.
Finally, major decisions concerning infrastructural projects in the country should be left to professionals to decide and make decisions on behalf of the whole country; this is how developed countries such as China, the USA and in thosein Europe decide. The lynch mob psychology evident among many Kenyans will not take the country any far. Had Nakumatt Holdings consulted an engineer before going to court, the current standoff would have been settled out of court and a working decision would have been arrived at very early. For example, carrying out the work at night when human traffic to the mall is low and a as a result the disturbance. Over and above that, Nakumatt Holdings stood to benefit with the completion of the project for the reason that occupants of the building would have definitely ended up doing their shopping in the facility.
To conclude, with Kenyans Vision 2030 just a few years ahead, it is expected that Kenya will experience a cannonade in construction where numerous buildings, roads and other infrastructural projects are expected throughout the country, the biggest fear is how many other projects, of the magnitude of Hazina Trading Center will be stalled by this silent threat that many know not?