NSFAS, what are you doing with student funds?
During 2022, OUTA started investigating mismanagement of student funds by the National Student Financial Aid Scheme (NSFAS).
This investigation was sparked off by our investigation into the Services Sector Education and Training Authority (Services SETA), when we found links to contracts in the two entities. Both entities fall under the Department of Higher Education and Training.
The failure by crucial institutions such as the Services SETA and NSFAS to manage their funds responsibly fails the unemployed youth and our country as a whole.
The National Student Financial Aid Scheme (NSFAS) is a massive fund to provide direct support to students in tertiary education.
NSFAS provides loans and bursaries to eligible students at public higher education and training institutions, and administers those funds.
During 2023/24 NSFAS receives R50.099 billion from the fiscus and said it aims to assist 439 659 eligible university students and 346 258 eligible students in TVET colleges. This funding is significantly more than the R21.827 billion which NSFAS received five years ago in 2018/19.
OUTA's investigation into the National Student Financial Aid Scheme (NSFAS) was sparked off in 2022 by our investigation into irregularities at the Services Sector and Education Training Authority (Services SETA), when we found that Services SETA contractors were linked to other tenders among the SETAs and NSFAS. See our Services SETA investigation here.
In February 2023, a report on our investigation outlined how we found that NSFAS hired service providers without them having the required banking licences to pay out student allowances at excessive rates relative to the market. NSFAS also hired a business which provided cloth masks to National Treasury in 2020 to work on an ICT contract and has rented an expensive head office space while slashing the subsidies for student accommodation.
We believe these tender awards are irregular. We question whether awards such as these are unnecessarily draining NSFAS resources and contributing to its cuts to student subsidies.
OUTA looked into three tenders:
SCMN022/2021: A five-year contract for the direct payment of NSFAS allowances to students, which OUTA believes could be worth at least R1.5 billion;
SCMN004/2021: A three-month contract to supply a digital tool to calculate student allowances; and
SCMN015/2021: The leasing of the NSFAS head office for two years, renewable for a further three years.
The tender for paying NSFAS allowances to students
NSFAS hired businesses without banking licences or VAT registrations to make direct payment of student allowances which offer students more expensive accounts than what is available from four of the biggest commercial banks in the country.
See OUTA’s table of comparisons below.
OUTA calculates that this deal could be worth as much as R1.5 billion over five years, just to provide students with access to a NSFAS bank card. This will be paid directly by the students out of their allowances, as the costs are deducted from their bank accounts. It is not known who will carry the costs for the manufacturing of the cards – NSFAS (the taxpayer) or the students (through direct debits on their accounts). OUTA found that most commercial banks in South Africa offer accounts for students with low banking fees and costs and more value-added services than the approved service providers.
Two similar bids to facilitate direct payment of student allowances were advertised then cancelled. A third bid was advertised in 2021 and awarded to four newcomers in the payment solution sector, who had not bid in either of the first two tenders.
The four relatively new companies who were successful with their bids were: Coinvest Africa (registered in 2019), Tenet Technology (registered in 2013 but dormant until 2021), Norraco Corporation (registered in 2019) and Ezaga Holdings (registered in 2017).
At the time of their bid submissions only one – Ezaga Holdings – held an affiliated banking licence with Access Bank. A banking licence or affiliation with a bank with a banking licence was a compulsory bid requirement. Two of the successful bidders, Norraco Corporation and Tenet Technology, were also not registered as VAT vendors when they submitted their tenders. The four newcomers competed against established companies including the big four commercial banks for the bid: Nedbank, FNB, Standard Bank, Absa and MTN all submitted bids for this tender.
Student allowance calculation tool tender
This was awarded to Futgenx Technology at a cost of R4.053 million for three months.
Futgenx appears to offer an astonishing range of services: the ICT services to NSFAS, a fleet management system for a tender submitted to the Services SETA in July 2020, and the provision of cloth masks for National Treasury in 2020. Information obtained from Treasury indicated that Futgenx introduced themselves as a manufacturer of masks and gowns with 153 employees.
Futgenx was paid R3.265m but didn’t finish the job; a new contractor, Idol Consulting, charged R1.995 million to finish it, resulting in NSFAS overpaying by R1.116 million.
The NSFAS office lease
In March 2022, NSFAS signed an office lease with Dynamic SA Holding for offices in The Halyard building in the Foreshore in Cape Town, a sought-after area. Although the lease agreement indicates that Dynamic SA is the landlord, a deed search shows that the building owner is Ziningi Properties.
The lease was signed for five years, backdated to start on 1 February 2022. According to the tender, it was supposed to be a two-year lease with an option to renew for another three years. The offices total 8 479 square metres and the cost over the rental period is R166.906 million, including VAT and escalations.
The 2020/2021 NSFAS Annual Report indicated that there were 383 people employed at NSFAS and 68 vacancies. If those vacancies are all filled and the 451 total employees are taken into account, then every employee will have an average workspace of approximately 18.8 square meters. Based on 451 employees, NSFAS will be paying an average of R74 000 per employee per year to lease this building.
Table below: Comparison between NSFAS card and big bank standard offers. Compiled by OUTA
What OUTA found
2022: The investigation starts
In September 2022, OUTA announced it was investigating tender corruption at NSFAS.
This followed OUTA’s investigation into corruption and irregular contracts at the Services Sector Education and Training Authority (SSETA) after a successful PAIA application relating to a R170 million tender for a biometric attendance monitoring system awarded to the Grayson Reed consortium. OUTA’s scrutiny of the documents for the Grayson Reed contract uncovered further maladministration, corrupt activities, and non-performance by Grayson Reed. The Grayson Reed contract was prematurely cancelled by SSETA. It was also subsequently found that some of the same individuals who were involved in the cancelled Grayson Reed, registered new companies with relatives as the directors. One of these companies was awarded a tender by NSFAS for similar services that the Grayson Reed Consortium provided to SSETA. See more here.
In October 2022, OUTA requested all the tender documents on the tenders we are interested in in terms of the Promotion of Access to Information Act, but the request was denied by NSFAS in December 2022. OUTA submitted an internal appeal and is awaiting the outcome. NSFAS has argued that if it shares the requested information with OUTA, the SIU investigation will be prejudiced. We do not believe this is a justification for refusing access to information.
If OUTA’s internal appeal against the NSFAS refusal is not successful, the matter will be referred to the Information Regulator for a review of the NSFAS decision.
We are continuing to investigate this matter.
2023: Investigation reports and criminal complaint
In February 2023, OUTA reported on the findings of our investigation into NSFAS: we found that NSFAS hired service providers without them having the required banking licences to pay out student allowances at excessive rates relative to the market. NSFAS also hired a business which provided cloth masks to National Treasury in 2020 to work on an ICT contract and has rented an expensive head office space while slashing the subsidies for student accommodation. See more here (including our table of comparison of banking costs charged to students compared to charges by big banks).
In June 2023, OUTA laid a criminal complaint of corruption against NSFAS CEO Andile Nongogo, one of his former colleagues at the Services SETA and two Services SETA service providers. The criminal complaints relate to the over-inflation of a specific tender, awarded to Five Star on 22 August 2016. It is alleged that Five Star over-inflated their bid for the branding of a tender box by a whopping 8 000%, or at least R292 000. See more on this here.
On 4 August 2023, OUTA reported that current NSFAS CEO Andile Nongogo had, while he was Services SETA CEO, signed off on an overpriced branding campaign that cost taxpayers R37 million. This included a branded T-shirt at R4 600, R44 000 for a branded umbrella, R980 for a coaster, R668 200 to print 100 copies of the SSETA Annual Performance Plan. See more here.
* NOTE that NSFAS contractor Tenet Technology is not the same company as Tenet (Tertiary Education and Research Network of South Africa).
"A culture of transparency demands open governance and the disclosure of information except in exceptional circumstances."
– The South African Human Rights Commission, on the pervasive failure by public bodies to honour PAIA requests for information from the public, in its annual PAIA report for 2019/20.
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