CEO of student fund may be in trouble after investigation

South Africa’s Minister of Higher Education, Science and Innovation, Dr Blade Nzimande, has been briefed on the findings of a damning report, which may result in the axing of the head of Africa’s largest student funding scheme and disciplinary action against staff who have been implicated in wrongdoing.

Andile Nongogo, the chief executive officer of the National Student Financial Aid Scheme (NSFAS), a government-funded bursary system for students who need funding support for their tertiary studies, has until Monday 23 October to provide reasons why he should not be fired over the irregularities. At the same time, staff implicated in wrongdoing will also face disciplinary action that will start immediately.

In another move, four fintech firms that were appointed to disburse NSFAS monies to students will have their contracts terminated.

Students have been protesting about changes in some of the scheme’s administrative processes, including increased bank charges. The fintech firms have been criticised for these charges.

“He [Nzimande] has been presented with the report and is currently studying it,” Ishmael Mnisi, the ministerial spokesperson, told University World News on 18 October.

Starting with a budget of ZAR33 million in 1991, serving 7,240 students, the fund has grown to ZAR47.6 billion (US$2.5 billion) in 2023, serving 1.1 million students, with fees paid to students as tuition, accommodation or monthly allowances.

Violation of public procurement processes

According to Ernest Khosa, the NSFAS board chairperson, the preliminary findings of an investigation by legal firm Werkmans Attorneys and advocate Tembeka Ngcukaitobi SC, into the irregular awarding of four contracts for the direct payment of allowances suggested that the process was flawed.

In addition to the action against the CEO and staff members, Khosa said the report found a conflict of interest in the appointment of the fintech service providers, which has led to the board agreeing on the termination of their contracts.

However, the board will ensure that the ending of contracts does not affect the students.

Furthermore, the board has committed to a review of the supply chain management policy, in line with the National Treasury regulations and policies, including the Public Finance Management Act.

According to the probe, Nongogo actively participated in the presentation, to the Bid Evaluation Committee, of proposals by service providers. This was a material violation of the public procurement processes of NSFAS, which he was employed to safeguard and uphold.

The report found that there had been a conflict of interest in the appointment of these fintech service providers.

Impact of NSFAS on society

Given the number of beneficiaries involved, Khoza said, the profile of the families directly affected by NSFAS operations has become a major political item.

In the past two years (2020-21), NSFAS spent an average of ZAR11.9 billion per annum on student accommodation funding.

“When something goes wrong at NSFAS, it immediately affects 1.1 million [students] and, when factoring in parents and siblings, it affects more than six million people at a go,” he said.

He added that NSFAS is a critical intervention by the state – one of the most important social-net interventions. The NSFAS board would do everything possible to assist because “students should not be the proverbial grass when elephants are fighting”.

Furthermore, Khosa said, despite the current challenges, the board reaffirmed its commitment to implement the direct payment solution as a necessary measure to reduce unauthorised access to beneficiaries’ allowances, payment of ghost students, inconsistencies and delayed payments of allowances.

He also revealed that there was no feasibility study before the current implementation of the direct payment system, particularly to support the justification to appoint the four service providers.

No reasons were given for the absence of the study, which, in hindsight, would have enabled NSFAS to make an informed decision on the proposed solution.

‘Explain report to students’

In a statement, Chantel King, the opposition Democratic Alliance shadow minister for higher education, said the party wants the board to explain the implications of the report to students and in parliament before the portfolio committee on higher education, science and innovation.

“The outcome of the investigation highlights the serious concerns we raised about the conflict of interest between Nongogo and the four direct payment service providers,” she said.

She added that the concern remains as the DA had indicated that the payments already made to the four direct payment service providers amounts to irregular expenditure due to the improper awarding of these contracts.

Her fear was that this could impact on students through non-payment of allowances which, at this stage, when examinations are about to start or have started already, might lead to student unrest and mental anguish for students and parents alike.

Said King: “We need to be briefed on how they will implement direct payments once the contracts of the four service providers are cancelled. Will a new bid process with new service providers be considered?”