South African civil society group, the Organisation Undoing Tax Abuse (Outa) has released a report that outlines an investigation into the allocation of funds within NSFAS including the new NSFAS dirent payment system.
The group wrote in their report: “The NSFAS bank card deal favours the contractors not the students and NSFAS management spends more on offices for themselves than they allow students for accommodation.”
The tenders Outa investigated include:
- A five-year contract for the direct payment of NSFAS allowances to students, which OUTA believes could be worth at least R1.5 billion;
- A three-month contract to supply a digital tool to calculate student allowances; and
- The leasing of the NSFAS head office for two years, renewable for a further three years.
Outa believes these tender awards are irregular and have questioned whether awards such as these are unnecessarily draining NSFAS funds and contributing to its cuts to student subsidies.
Since the announcement of the new direct payment system, (which will see NSFAS students receiving monthly allowances via the new Nsfas bank card) concerns have raised about how it would benefit and be advantageous to students.
Outa Portfolio Manager Rudie Heyneke said that their investigations found that the Nsfas hired service providers without them having the required banking licences to pay out student allowances at excessive rates relative to the market.
The service providers include, Coinvest Africa, Tenet Technology, Norraco Corporation and Ezaga Holdings.
“We believe the students are being locked into very expensive deals aimed at benefiting the service providers, not the students, which smacks of an enrichment scheme for the new, inexperienced companies, who stand to rake in hundreds of millions of rands at the expense of students and taxpayers,” said Heyneke.
He adds, “Outa’s research shows that most of the commercial banks in South Africa offer accounts structured for students with very low banking fees and costs and substantially more value-added services than the approved service providers.”
Outa highlighted that 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.
Furthermore, the two other tenders that were also investigated raised various concerns, Outa said it questions the value of these contracts, particularly in the light of the NSFAS reduction of subsidies for student accommodation.
Outa noted that despite the scheme’s decision to cap accommodation allowances for the 2023 academic year, their investigation revealed that NSFAS spent more than R166-million on office rental space in Cape Town, which means on average NSFAS is paying R74,000 per employee to lease its offices per year.
With the academic year already off to a rocky start as several tertiary institution students are protesting against the cost of accommodation, Outa believes that the highlighted tenders should form part of the current investigation led by the special investigation unit as public funds are being mishandled.
