NSFAS Accused Of Mismanaging Millions In Funding


The Organization Undoing Tax Abuse has revealed its findings uncovered during an investigation into the National Student Financial Aid Scheme. The bursary provider has been under intense scrutiny over the past few weeks, due to the discovery of millions in mismanaged funds.


The Organization Undoing Tax Abuse (OUTA) has now also joined the conversation, providing reports from its own investigation into the National Student Financial Aid Scheme NSFAS, which began in 2022. 

According to OUTA, its investigation first began last year with an initial enquiry into irregularities within the Services SETA, when the organization found links to contracts in the two entities (the Services SETA and NSFAS). Both entities fall under the Department of Higher Education and Training (DHET). 

In its report, OUTA said:

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.

OUTA's report highlighted how the organization discovered that NSFAS hired "service providers without them having the required banking licenses [or VAT registrations] to pay out student allowances at excessive rates relative to the market." 

As per OUTA, 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." 

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.

OUTA has questioned whether these kinds of "awards" are necessary, or are actually draining NSFAS resources and contributing to cuts made towards student subsidies, most notably the R45 000 student accommodation allowance cap implemented this year. 

NSFAS has been working on implementing new systems and methods of allowance distribution, particularly in the form of NSFAS Mastercards and Bank Accounts for funded students, which will see allowances deposited directly into a student's account, instead of distributed through the student's tertiary institution. 

The NSFAS Bank Account was introduced in collaboration with third-party financial service providers eZaga, Coinvest, Morocco and Tenet Technology. 

However, according to OUTA's investigation, only one of the four above-mentioned service providers, Ezaga Holdings, held an affiliated banking license 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.

Futgenx Technology was tasked, by NSFAS, with calculating the student allowance tender at a cost of R4.053 million for three months. 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, reports OUTA. 

Futgenx provides System Development, IT Architecture, Solutions Design & Software installation services. 

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, says OUTA. Although the lease agreement indicates that Dynamic SA is the landlord, a deed search conducted by OUTA shows that the building owner is actually 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, as per OUTA's report.

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.

OUTA notes that in early 2023 NSFAS cut its subsidies for student accommodation to R45 000 per student per year, leaving many students unable to afford accommodation.

Amidst ongoing housing issues and the shortage of suitable accommodation, student organizations have been calling for the R45 000 student accommodation cap to be reconsidered.

This cap applied to all funded students regardless of whether they were in university accommodation or private accredited accommodation. However, a shortage of student housing supplied by public universities, left students with no option but to seek out housing from private service providers.

Student housing providers in the private sector are notorious for overcharging students, especially if they know that the government will be covering the costs. This means that thousands of students were unable to find suitable and affordable housing close to campus, leaving them stranded. 

This accommodation cap has left students homeless and the Democratic Alliance Student Organization (DASO) believes that NSFAS is violating students' right to housing and education. However, NSFAS reports that extensive research was conducted before making the decision to cap accommodation funding. 

Separate allegations of fraud within NSFAS were also recently revealed, involving the wrongful allocation of funds to students who do not qualify for the bursary scheme. NSFAS has responded, welcoming the investigation, which uncovered R5 million in funds mismanagement.


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