NSFAS Cancels Contracts With Fintechs Appointed To Make Allowance Payments

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After controversy ensued with the NSFAS direct payment system, the financial aid scheme was ordered to break ties with the fintechs appointed to provide disbursement services. NSFAS has now officially started this process.

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The National Student Financial Aid Scheme (NSFAS) is responsible for disbursing allowances to TVET College and university students for accommodation, transport, learning materials and other students. However, there has been many hiccups when it came to recent allowance payments.

The Direct Payment solution was introduced by NSFAS in 2022. This saw NSFAS allowances paid to students using a NSFAS bank account facilitated by fintech providers.

However, this new system only brought challenges along with it which lead to students having to pay exorbitant bank charges and allowances being delayed.

After allegations of tender corruption arose, an investigation took place revealing that the appointments of these fintechs were irregular. The following was found during the investigation:

  • No feasibility study was done before the payment system was implemented, particularly for the justification for the appointment of the four service providers 
  • Investigator said there was no reason given as to why a feasibility study was not conducted and that it is integral in the implementation of the project
  • A feasibility study would have resulted in NSFAS making a much more informed decision and to evaluate the practicality and chances of success of the system
  • There was an amendment to the bid specifications to include fintech companies which resulted in drastic changes in mandatory requirements of the original bid
  • The changes made to the bid specifications would have required a deeper analysis to be made on the need of the fintech companies
  • There was a conflict of interest with the ex-NSFAS CEO, Andile Nongogo, who actively participated in the presentation to the bid evaluation committee
  • Nongogo was involved in the appointment of two of the four service providers, namely Coinvest and eZaga as he has a possible relationship with those service providers
  • Technical advisor, appointed by Nongogo, was "inherently incorrect" 
  • Inability to conduct due diligence to service providers
  • Appointment of service providers were irregular

Werksmans Attorneys then provided a list of recommendations which NSFAS was ordered to execute. One of these being that the contracts with the fintechs should be cancelled.

NSFAS Administrator, Mr. Freeman Nomvalo, held a briefing on Monday morning providing updates on the direct payment system and said:

We are working on improving procurement processes and the four service providers that were appointed as direct payment providers, we have initiated the process to sever ties, cancel those agreements.

Nomvalo revealed that court papers to initiate this process were filed on 24 May. NSFAS will be collaborating with the Special Investigating Unit (SIU)  to deal with these issues.

He also said that they are dealing with the disciplinary action against those employees which were involved.

NSFAS Board Dissolution

In January 2021, the Minister of Higher Education, Blade Nzimande inducted the new NSFAS Board. Following various controversies at the financial aid scheme, in April 2024, Nzimande announced that the Board would be dissolved with immediate effect.

The decision was taken, "as part of the set of interventions to improve the organisation efficiency" of NSFAS in order to "ensure it remains focused on its mandate".

The NSFAS Board’s chairperson, Ernest Khosa resigned just before Nzimande announced his decision to dissolve the board. Khosa was recently placed on special leave following NSFAS launching an investigation into his involvement in receiving irregular payments in connection with the NSFAS Direct Payment System.

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NSFAS allowances

More than one million students receive NSFAS allowances monthly. However, the payment of allowances has not been efficient over the last few months and a private bursary scheme has offered to assist NSFAS ensure students are paid their bursaries on time. 

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