Rinse and repeat: The ongoing saga of NSFAS
Even the striking visuals of the VBS bank dismantling, which has not resulted in any charges three years later, fail to provoke a response.
State capture, the findings of the Zondo Commission, the hollowing out of the state-owned enterprises, and the Stalingrad approach employed by our former president, Jacob Zuma, and emulated endlessly since then, further contribute to this surreal space where everything seems unbelievable, and nothing seems to matter.
Once upon a time
However, these matters are, indeed, significant. While tracing the money a decade after events have passed and funds have been long laundered may be challenging, following the narrative’s shape remains crucial.
We must become increasingly familiar with the narrative trajectories of corruption as it will ultimately serve as a means of recognising exploitation in the future and of providing details in the historical recounting of the story of South Africa’s unique dismantling.
In short, we must convert these miscarriages of justice into stories for future generations – stories that look like fiction but are, in fact, truth. As diligent as the government’s Special Investigating Unit and the priority police unit, the HAWKS, may have been, they have all too often been ineffective in curbing these brazen attacks on our democracy.
This story cannot rely solely on proven facts, which may take years to clarify, corroborate and act upon. If ever. The focus here is to follow the story outline. Christopher Booker published The Seven Basic Plots: Why we tell stories in 2004. He outlined seven meta-plots underpinning all stories. These are: overcoming the monster, rags to riches, the quest, voyage and return, comedy, tragedy and rebirth.
Drawing from his work, we can begin to tell a story about Andile Nongogo, CA(SA), formerly holding the esteemed roles of chief financial officer (CFO) and chief executive officer (CEO) at the Services Sector Education and Training Authority, or (SSETA).
Before joining the SSETA, which is tasked with skills development, his LinkedIn page confirms a tenure of over 15 years as the deputy director of external audit at the Auditor General of South Africa.
Until Tuesday, 24 October, when he was fired, he was the CEO of the National Student Financial Aid Scheme (NSFAS), the government’s bursary support scheme for students.
A cautionary tale
Most of the stories that emanate from the SSETA and NSFAS are so ludicrous that they belong, using Booker’s methodology, somewhere between a quest, comedy (farce, a subset of comedy) and tragedy.
In the events of the tender process for the SSETA and fascinatingly detailed by the Organisation Undoing Tax Abuse (OUTA), who took up the cudgels on this piece of fraud and non-delivery to the tune of ZAR162,669,000 (about US$8.5 million).
The OUTA piece should be required reading for the entire auditing community. A brief overview of the irregularities outlined by OUTA should give you a flavour.
Tender PROC T434, published in the Government Tender Bulletin, the South African Sunday news publication City Press, and the daily publication The Sowetan, solicited a Request for Proposal (RFP) concerning “the appointment of a service provider to facilitate direct payment of SSETA learner stipends”.
Issued on 25 August 2017, the tender’s closing date was set for 29 August 2017, deviating from the customary 21-day opportunity to respond as a standard requirement.
The RFP published on the SSETA website called for the “Appointment of a service provider for the rollout and management of the biometric learner attendance monitoring system (BLAMS) and direct disbursement of periodic learner stipends”. Not only are these completely different RFPs, but there is no mention of any feasibility study being undertaken on either.
The SSETA Bid Evaluation Committee (BEC) convened on 21 August 2017, a full eight days prior to the submission deadline. What was odd is that one of the standing members was Burah Mkhatini, a lawyer from Voyi Inc — a service provider – who was, thus, among the SSETA members evaluating the bid.
Upon deliberation, the committee determined that a company named Grayson Reed represented the most favourable candidate in terms of functionality, price, and B-BBEE status (it also contained a range of other companies in its consortium).
This recommendation was then taken to the Bid Adjudication Committee, or BAC, for approval. From there, and still containing these errors, it passed on to the Accounting Authority for final ratification.
It also claimed that due diligence had been successfully carried out. However, had the SSETA conducted thorough due diligence, it would have uncovered several disqualifying factors concerning the bidder.
Firstly, Grayson Reed lacked the requisite experience for the project. Furthermore, from the date of its registration until 2017, the company remained dormant. Additionally, it held an inactive status with SARS (South African Revenue Service), and no tax returns had been submitted due to the absence of income generation.
Lastly, a tax compliance certificate – a crucial requirement – was issued only subsequent to the evaluation of bids (OUTA, 2022, 16-17). Grayson Reed was, in fact, the trading name of Muroba Group Holdings (Pty) Ltd. The bid document shows a consortium of four companies: Kulanati Financial Solutions, Grayson Reed Consulting, Dram Group and NexGen and was submitted on 21 August 2017, the day of the BEC meeting at which they were selected.
Subsequent to the sign-off by the SSETA CEO at the time, Andile Nongogo, a crucial document – the Master Service Level Agreement (MSLA) – was promptly introduced. The MSLA, which occupies a binding position within the project, exhibited several inaccuracies.
These included erroneous numeration, misleading information, and recurrent inconsistencies. The SSETA asserted that 2,100 biometric devices (not the 3333 promised in the MSLA) were distributed to various locations throughout the country.
Nevertheless, OUTA contends that these were not, in fact, biometric devices; instead, they were Huawei Media Pads. Whether they were actually delivered still remains unclear. The Auditor-General also found these same irregularities.
The SSETA should be a cautionary tale for all the players implicated: R162 million is gone, and no one is held accountable. Moreover, poor students are deprived of a potentially helpful service. Nevertheless, someone was going to live happily ever after.
Rebirth at NSFAS
The details of the SSETA maladministration are necessary to set out to prepare one for the replication and the rebirth of former NSFAS CEO Nongogo. This story is a playbook of what we have come to expect as the norm.
With the global defunding of higher education, NSFAS offers desperately needed respite to poor students in South Africa. In the United States alone, student debt stands at US$1.75 trillion, with US$28,950 owed on average by each student at both public and private institutions on completion.
Established in 1999, NSFAS is a powerful funding mechanism but has faced controversies, inefficiencies, and scandals. Initially, it was designed to replace the Tertiary Education Fund of South Africa (TEFSA), which had been criticised for uneven distribution of funds, limited geographic reach and maladministration due to inefficient systems.
NSFAS came into being as the professionalisation of TEFSA, aiming for a more inclusive approach towards financially disadvantaged individuals. However, financial mismanagement has plagued the scheme.
Audits have revealed poor financial record-keeping, such as ZAR7.5 billion (now US$392.2million) in irregular expenditure during the 2018-19 financial year, significant leadership turnover with eight CEOs since 1999, and the ZAR14.1 million NSFAS accidentally gave to student Sibongile Mani in 2017, which exposed significant weaknesses in the scheme’s financial controls.
Xolisa Mvinjelwa was the NSFAS CEO between 2014 and 2016, a period marked by frequent student protests, but also the introduction of the Student-Centred Model, which established a direct relationship between the student and NSFAS, effectively by-passing the university and technical and vocational education and training, or TVET, college that used to disburse the funds.
It also ushered in an era that led to the current payment debacle. Here, there are another four ‘fin-tech’ companies that won the bid: eZaga Holdings (registered in 2017), Coinvest Africa (formed in 2019), Tenet Technologies (formed in 2013 but dormant until 2021) and Norraco Corporation (registered in 2019).
So brazen was some of this naming that the Tertiary Education and Research Network of South Africa (TENET) was forced to distance itself from Tenet Technologies in February 2023 and begin property rights litigation in March 2023.
Same old, same old
After a series of student protests throughout the year against late payment, excessive bank charges levied by these four companies, defunding of students, CEO Nongogo was placed on special leave in August 2023, and Werksmans Attorneys compiled a report which was released and discussed by the NSFAS board on 15 October 2023.
One of the immediate discrepancies the NSFAS Chair Ernest Khoza relayed was that Nongogo had not only appeared in the BEC application process but had hired an external adviser to be included in the BEC.
As quoted in The Daily Maverick, “What is more noteworthy is [the adviser’s] association with certain companies appointed as service providers, both at the Service Sector Education and Training Authority and at NSFAS.”
If this starts ringing deafening bells, it is unsurprising when Khoza highlights that there was a concerning absence of due diligence regarding the capacity and credentials of the service providers.
Furthermore, the lack of a feasibility study prior to commencing this entire endeavour is of significant importance and deeply worrying to the board. And, of course, the modus operandi is also in place.
As OUTA puts it: “It was also subsequently found that some of the same individuals who were involved in the cancelled Grayson Reed, registered new companies with relatives as the directors.”
One of these companies was awarded a tender by NSFAS for similar services that the Grayson Reed Consortium provided to SSETA.
This brings us to the tragedy. As usual, it seems to be the case that the students (always the poor and working class) are the ones who will suffer most. Late or no payments, inflated transaction fees, defunding accommodation impacts, food security, their studies and possible success.
But it also perilously impacts the university student debt, which stood at ZAR16.5 billion in January 2021 (and is estimated at historical trends to exceed ZAR19 billion), and continues to rise.
With 1.1 million students on the scheme and ZAR46 billion in disbursals and with South Africa’s 26 public universities contributing significantly to the economy – about ZAR500 billion in 2018, according to research by Ahmed Bawa and Anastassios Pouris, “this makes the sector as profitable as the gold mining or the beverages and tobacco industry.”
A small group of grifters put all of this at serious risk, repeating what they had done before and getting away with it.
The worst part of this whole calamity was that the solution was always simple. To make direct payments to students, all that was needed was for students to hold a valid South African bank account (of their own choice) and payment would be made through a regular payroll, just like government staff.
There was no need for special NSFAS cards and high fees, especially when our top five banks are among the best, at least in fiduciary terms, in the world.
In a surprising move, NSFAS recently decided to cancel the contracts with the four fintech companies responsible for disbursing funds to students. Additionally, in an attempt to restore public trust and ensure transparency, the board has decided to fire CEO Nongogo.
NSFAS Chair Khoza, in a recent statement, emphasised that these measures were taken to ensure that the integrity of the organisation is not compromised any further and to reinstate NSFAS’s commitment to its primary purpose – assisting deserving students in their educational pursuits.
By sharing and revisiting these narratives, we, as a united front, can “overcome the monster”. In doing so, we hope to shift the narrative where political might is not the ultimate determining force.
Dr Linda Meyer is the managing director of IIE Rosebank College and Patrick Fish is an educational consultant.