• Infrastructure

NHE runs dry

• 3 Days Ago - 2025-07-28 08:53:00

The National Housing Enterprise (NHE), which has built approximately 18 300 houses in 31 years, is no longer in a position to roll out capital projects, according to its chief financial officer, Beverly Vugs.
In a memo dated 16 July and sent to the executive committee, Vugs warned that the company’s overall financial position is unstable and highlighted that it faces significant challenges with liquidity and cash flow.
She revealed that loan repayments are insufficient to cover operational expenditure, fuel necessary growth, or initiate new capital projects.
“The memo serves to inform Exco that NHE is experiencing serious challenges with liquidity and cash flow,” she wrote.
“The financial position of the company is not favourable, and NHE is no longer in a position to roll out capital projects, which puts a strain on loan book growth and operational revenue,” she stressed.
Vugs also revealed that the company has spent as much as N$500 000 on site handover events in the past and warned that such costs place an unnecessary strain on the enterprise’s finances. While she noted that the NHE plans to reduce these events to just two per year, she pointed to several other instances of financial waste within the organisation.
“It is absolutely imperative that every member of Exco fully grasps the severe financial reality confronting NHE,” Vugs wrote, adding that “the era of government bailouts for Public Enterprises (PEs) is unequivocally over; our core mandate now demands that we generate sufficient revenue to sustain our own operations.”
‘Deeply troubling’ trends
Vugs noted that the board has previously issued directives requiring that spending patterns and operational expenditure be rigorously aligned with the company’s operational income. “This is not merely a budgetary adjustment, it is a fundamental and critical shift, meaning NHE cannot and will not spend beyond its current, limited means,” Vugs said.
“Our year-to-date results as of June 2025 paint a stark and deeply troubling picture of the enterprise’s cash flow and profitability performance. Progress in construction, sales, and transfers has been unacceptably conservative and agonisingly slow,” she pointed out. “We have as an entity failed to initiate capital projects and have demonstrably, and repeatedly, missed our quarterly targets.”
Code red
Vugs added that while the NHE is currently able to meet its obligations to third parties, the outlook looks bleak and urgent intervention is required. Vugs attributed their financial woes to clients being unable to afford houses. “The persistent struggle with project sales in the financial year, primarily due to client affordability issues in the regions, continues to severely exacerbate our challenges, directly impacting our core revenue streams,” she wrote.
She explained that the “anticipated cash inflows and housing output have simply not materialised, placing immense and unsustainable strain on the enterprise’s liquidity. While we have, to date, commendably avoided defaulting on any mandatory payments (SSC, pension, medical aid, ROR), salaries, or contractor payments, this precarious balance is fragile and cannot be guaranteed indefinitely.”
She stressed: “This is a critical warning sign that demands immediate attention.”
On the issue of revenue, Vugs stated that NHE’s revenues have drastically plummeted over several years, directly leading to a significant and concerning reduction in profit from operations. “This decline severely impedes our ability to generate sufficient revenue to increase vital housing output, thereby undermining our very mandate,” she wrote.
‘Radical’ discipline urgent
Furthermore, Vugs said there is currently no guarantee that NHE will receive recapitalisation for the 2025/2026 financial year.
“This stark reality demands immediate, decisive, and collective action from every member of Exco. The time for passive observation is over, the time for radical financial discipline and strategic reprioritisation is unequivocally now,” she said.
To ensure the NHE’s survival and its continued ability to deliver on its core mandate, Vugs stressed that it is no longer merely advisable, but mandatory, that available funds be allocated exclusively to core activities directly aligned with the organisation’s approved strategic objectives.
She also urged the executive committee to immediately formulate and implement drastic, non-negotiable measures to eliminate all non-core operational expenditure.
She noted that management “must immediately cease approving nonessential expenses. We are compelled to drastically reduce all non-critical travelling, limiting it strictly to activities that demonstrably generate revenue.
“From this moment forward, only expenses that are demonstrably necessary and critical for the absolute day-to-day operations of the organisation will be approved by finance.”
Vugs underlined that the “severe unavailability of funds leaves the finance department with no alternative but to immediately implement resolutions that entail drastic cost containment measures until our financial position shows undeniable improvement.”
Fundamental changes
Vugs suggested that NHE must boost overall performance through increased revenue, lower operating expenses, improved customer satisfaction and enhanced workforce productivity.
She proposed an immediate and strict reduction in travel and site handover events.
“These events drain the company’s coffers by up to N$350 000 to N$500 000 per event, a cost we absolutely cannot sustain,” she wrote, adding that no more than four people, including board members and the chairperson, unless required by the minister, should attend.
NHE spokesperson Mutonga Matali has confirmed the authenticity of the memo. “The caution issued by the CFO forms part of our normal procedures to regulate our day-to-day operations and ensure that special emphasis is placed on the delivery of houses in line with the NHE mandate. It’s no cause for alarm and I can assure you that salaries will be paid on time as usual,” Matali said. - [email protected]