The National Student Financial Aid Scheme (NSFAS) has revealed that there may have been a conflict of interest in the appointment of two fintech companies to pay NSFAS allowances.
The Report established that NSFAS CEO Andile Nongogo actively participated in the presentation to the Bid Evaluation Committee (BEC) of proposals by service providers. This is a material violation of public procurement processes of NSFAS which he was employed to safeguard and uphold.
There are indications two fintech companies had a “possible relationship” with Nongogo. These companies were Coinvest and eZaga.
Furthermore, the Report reveals that there seems to have been a conflict of interest in the appointment of these (4) fin-tech service providers... Another concern raised in the report in (sic) the inability of not conducting a thorough due diligence of the service providers.
NSFAS Board Executive Ernst Khosa presented the findings of the investigation to members of the media on Wednesday, 18 October 2023. The financial aid scheme’s board received Werksmans Attorney's findings after investigating claims of corruption against Nongogo and reviewing NSFAS' procurement systems.
Nongogo has faced allegations of corruption and maladministration during his previous employment, raising concerns about service providers from that time potentially becoming involved with NSFAS. The NSFAS board has committed to implementing the recommendations of the investigative report, ensuring it doesn't negatively impact NSFAS students.
Khosa says the NSFAS board will implement the recommendations of the report after carefully studying its findings. This will be done in a manner that does not negatively affect NSFAS students.
The board views the direct payment solution as a necessary measure to prevent unauthorised access to student allowances.
Given the findings in the report, NSFAS has decided not to terminate service provider contracts immediately, but it has been acknowledged that they will eventually part ways with these providers.
A key concern highlighted in the report is the absence of a feasibility study prior to implementing the direct payment system, particularly in justifying the appointment of four service providers.
It was resolved that NSFAS should have conducted a feasibility study. A feasibility study is a critical part of project preparation and no feasibility study was done before the direct payment system. Conducting a feasibility study would have allowed NSFAS to make a much more informed decision about the direct payment system.
There was no feasibility before the current implementation of the direct payment system, particularly the justification of the appointment of the four services providers.
It was revealed that there was an adjustment to the original 2020 tender which allowed Fintech companies to participate in the tender process to pay allowances directly to students. This resulted in drastic changes to the mandatory requirements.
These changes would have required deeper analysis to be conducted amongst others on the need of the fintech companies, their value added services, their service direct cost to students and the cancellation of the 2020 tender.
Khosa emphasised that despite the challenges, the board will continue to implement “progressive policies”. This indicates that the NSFAS direct payment system will continue to be implemented at higher education institutions.
Legal action will be taken against NSFAS staff who participated in any wrongdoing
Nongogo, along with the service providers have been furnished with information on the reports’ findings. The full report will be furnished to the service providers, stakeholders and members of the media in due course.
Background To Investigation
NSFAS funds more than one million students enrolled at public tertiary education institutions in South Africa. These students not only receive money for tuition and registration but also receive several allowances to cover costs associated with their studies.
When something goes wrong it affects more than 1.1 million students
They added that the NSFAS Board would have investigated anything that had a bearing on NSFAS or students. This was in response to a question which enquired whether NSFAS would have taken action if not for OUTA.
NSFAS provides students with an accommodation allowance, meal allowance and a stationery allowance. Students who live near their campus may receive a transport allowance instead of an accommodation allowance.
In 2022, NSFAS Introduced a direct allowance payment system for Technical Vocational Education and Training (TVET) colleges. The direct system was expanded to include universities in 2023.
The investigation sought to determine whether these service providers are registered financial entities and whether there is a historical business and tender relationship between the CEO and the directors of these companies.
Reports indicated that Nongogo participated in the process of selecting and awarding contracts to four Financial Service Providers to pay NSFAS allowances directly to students. The companies are Coinvest, eZaga, Noracco and Tenet Technology.
Nongogo has not responded publicly regarding the findings made in the report. This article will be updated to reflect his response.