NHEL must adhere to directives

Editorial, Normal

The National, Wednesday July 22nd, 2015

 WHATEVER happened to Housing Minister Paul Isikiel’s decision to relocate the National Housing Estate Limited (NHEL) back to the National Housing Corporation (NHC) headquarters in Tokarara, National Capital District?

Isikiel issued the directive in March following concerns that the NHC had been placed in a “weakened financial position”.

In a ministerial directive to NHEL executive chairman Kevin Ahipum on March 24, Isikiel directed that:

  • NHEL immediately vacate its office on the 7th Floor of Pacific Place building in downtown Port Moresby due to excessive monthly rentals and relocate to NHC headquarters in Tokarara;
  • NHEL CEO/executive chairman to report to NHC managing director as of March 24; 
  • NHC managing director will be the signatory to all NHEL accounts to comply with the Public Finance Management Act as the properties in NHEL’s care are owned by the State; and,
  • NHEL to be restructured to operate within the NHC organisational structure and to share resources with the corporation.

NHEL was incorporated pursuant to a National Executive Council decision to create a business arm for the NHC. 

Since the NHC does not receive re-current budgetary allocation from the National Government, the intention was for NHEL to commercially manage some selected and prime NHC assets to generate revenue to support NHC operations. To that end, 72 prime NHC properties were vested free of charge to NHEL to manage.

“As a result, the NHC rental revenue from those properties has plummeted, placing NHC in a weakened financial position,” Isikiel said in his letter to Ahipum.

“The State and NHEL have not compensated NHC for the depletion of NHC assets valued in excess of K800 million, as is required by Section 27 of the NHC Act, which provides that where the NHC suffers a reduction in revenue or loss of assets as a result of the implementation of a NEC decision, the state shall compensate NHC to the value of the loss.”

It is understood the NHEL, since taking over management of NHC assets, has not financially supported the corporation. It has instead applied those funds for its own purposes to fund its inflated costs and overheads, thereby depriving NHC of its revenue.

We agree with Isikiel’s observations that there is much confusion on the roles and responsibilities of NHC and NHEL. 

The public perception is that both entities are running parallel housing programmes.

Moreover, the 72 prime properties vested free of charge to NHEL to manage remain the assets of the NHC and therefore are subjected to the Public Finance Management Act. 

Once the NHEL develops these properties commercially and makes money, it must pay dividends to the NHC to continue to develop social housing programmes. As Isikiel reminded Ahipum, “The main reason for setting up NHEL was to generate income for NHC to deliver on its mandate since government funding was never available to NHC. 

“The intentions for establishing NHEL was novel, however NHEL cannot run parallel public housing programmes which are in direct conflict with that of the Government’s sponsored social housing projects run by NHC.”

The Housing Minister must be commended for stamping his authority on this contentious issue and clarifying this confusion which has caused much anxiety among the management and staff of both entities.

As Isikiel rightly stated, NHEL remains a wholly-owned subsidiary of NHC and NHEL reports to NHC for the purposes of the Public Finance Management Act and prudent management protocol.

Ahipum and his management team must adhere to the ministerial directive and start moving out of their plush Pacific Place office, which is believed to be overly expensive and against the revenue focus of NHEL.

As it is, the contentious issues between NHC and NHEL remain and are obstacles to their commitments to the State and the people in providing affordable housing programmes.

If the NHEL management continues to defy the ministerial directives, Isikiel will need to take a tougher stand to reassert his authority.

NHEL should not dictate housing policies and programmes without the consent of the minister and the NHC management.