Decisive action is needed to restore credibility of NSFAS

Within the realm of ethics, there is a train of thought that stretches from Immanuel Kant’s categorical imperative to Peter Singer’s utilitarianism and encompasses John Rawls’ concept of the veil of ignorance. That golden thread, linking them all, emphasises the need for equal and fair treatment of everyone in society.

In a just society, the principles of transparency and the sanctity of human rights govern the actions of those in power. Regrettably, these principles are more often absent than present on a global scale. The stark reality of corruption preying on the most vulnerable population is particularly evident in South Africa.

At the height of the COVID-19 pandemic, the theft of funds and services designated for those most vulnerable reached alarming levels. This corruption has permeated the South African Social Security Agency (SASSA), where funds intended to support the poorest individuals are doled out to deceased or fictitious persons who continue to receive monthly payments.

However, one of the most disheartening manifestations of this malaise is the looting of the National Student Financial Aid Scheme (NSFAS) and the blatant disregard for impoverished students.

Minister of Higher Education, Science and Technology Dr Blade Nzimande has supposedly made the first step towards rectifying the situation by dissolving the NSFAS board and placing it under administration to be controlled by Freeman Nomvalo, former SA accountant-general and previous CEO of the South African Institute of Chartered Accountants (SAICA).

How this will work is anyone’s guess, especially if one has had the chance to read the jaw-dropping input of journalist Carol Paton headlined, ‘Blade Nzimande, his alleged corrupt band of cadres, and the looting of NSFAS’, which raises alarm bells, inter alia, on the selection of Nomvalo for this role.

In her article, Paton, in words made famous in South Africa by Public Enterprises Minister Pravin Gordhan, “joins the dots”, particularly when it comes to her discussion of the numerous far-reaching and astounding claims that emerge in secret recordings of the verbal interactions between the former NSFAS chair and two others.

These recordings, which appear to expose discussions of corrupt practices, were subsequently leaked to anti-corruption group Organisation Undoing Tax Abuse (OUTA), which generated a report attempting to decipher the implications of the discussions. It is this material that Paton utilised as the basis for her investigation.

It is remarkable that, despite the evidence, those implicated in the OUTA report and subsequent news coverage act as victims, spouting a disingenuous propaganda when exposed. Furthermore, they are spread across several other government structures, and are perpetually recycled over time with a patently evident agenda.

Merely replacing the board or management, as Nzimande has done, without addressing the underlying causes and structures that enable corruption, is futile and will only create an illusion of change that we have become accustomed to. Achieving lasting change necessitates dismantling current corrupt structures and establishing robust systems that foster accountability, transparency, and ethical governance.

The problem the minister cannot avoid is that his actions and rationale aimed at keeping NSFAS alive, as OUTA has so often pointed out, are incomprehensible. NSFAS is serving as a lucrative looting (Lotto) machine. Corruption is endemic and structural and is unaffected by who is on the board. Corruption is deeply embedded in the organisation’s procedures, culture, and perhaps even its informal norms and practices.

TEFSA – The precursor to NSFAS

Established in the mid-1990s, the Tertiary Education Fund of South Africa (TEFSA) was an organisation tasked with administering financial assistance to disadvantaged students pursuing higher education in South Africa.

Upon its establishment in 1991, TEFSA received roughly ZAR25 million (now US$1.3 million) to support underprivileged black students, primarily through donor contributions and various ad hoc initiatives.

By 1999, the organisation managed an impressive ZAR450 million, with a commendable recovery rate of 71%. Nevertheless, it is essential to note that TEFSA faced its fair share of challenges during this period.

TEFSA faced censure for its inefficiency in disbursing funds, frequently experiencing delays. Consequently, many eligible students did not receive their financial assistance in a timely manner. There were also allegations regarding fiscal mismanagement within the organisation. Critics contended that TEFSA lacked the requisite systems and controls for effective management and allocation of its resources.

The extent and scope of TEFSA were also subjects of dispute. While the fund’s underlying concept was laudable, its flawed implementation resulted in numerous deserving students being excluded.

In response to these and other concerns, the South African government opted to replace TEFSA with NSFAS. The National Student Financial Aid Scheme Act 56 of 1999 established the National Student Financial Aid Scheme, assuming TEFSA’s responsibilities and effectively ending the organisation. NSFAS aimed to redress some of TEFSA’s shortcomings by adopting a more structured approach to delivering student financial aid.

Two elements to the act are of interest.

Firstly, from the outset, the act delineated the modus operandi for NSFAS. Essentially, an organisation was established to finance universities that would then identify deserving candidates and disburse funds accordingly. In other words, NSFAS was not an independent distributor of funds directly to students and was never intended as a middleman for this function.

Section 20.1 permitted NSFAS to forge agreements with universities for administering loans and bursaries and receiving student loan and bursary applications.

Secondly, the National Student Financial Aid Scheme Act was last amended in 2011. The amendment’s sole purpose was to grant the minister authority to dissolve the board and appoint an administrator, should the minister deem it necessary.

The revised bill fails to mention or make provision for NSFAS contracting outsourced entities to act as intermediaries for disbursing allowances directly to students and charging the students excessive fees for banking services. Additionally, there is no reference to the role of NSFAS in assessing student accommodations.

Separately, there are concerns about NSFAS’ relocation to luxurious offices. According to IOL media reports, these opulent offices, located in a high-end building in Cape Town, cost nearly R2 million per month in rent. This building, resembling a multinational company’s headquarters rather than a student service centre, is a virtual fortress, far from the ideal setup for a student services centre.

This situation raises a critical question: why is the NSFAS head office located in Cape Town, where only a fraction of NSFAS beneficiaries reside, instead of in Gauteng, where the majority of NSFAS students are located?

Inaction

To make matters worse, universities are already owed more than ZAR19.2 billion arising from student debt, a situation that puts them in an unnecessarily vulnerable position.

Compounding the financial challenges is the fact that, even after the brawl of last year, the same four ‘finance businesses’ (eZaga, Norracco, Coinvest and Tenet Tech) are still dispensing (or not dispensing) funds to students. This, after their contracts were supposedly cancelled at the end of last year to mitigate the public outcry.

A TGR Attorneys report, which was published in March 2024 in response to OUTA’s allegations stemming from the recordings involving Ernest Khosa, former chairman of the NSFAS board, and two others linked to questionable payments, is telling. The findings concurred wholeheartedly with the earlier Werksmans [attorneys] Report, which recommended that the operations of those four ‘financial’ firms be terminated at the earliest opportunity.

And yet, six months after that recommendation, the TGR report states the following:

“229. By November 2023, the Board had already obtained two legal opinions, and had resolved to instruct Werksmans to advice (sic) on the implementation of the termination of the contracts of the service providers. The Board is working with Werksmans on this issue to date.”

Earlier this month (8 May) Freeman Nomvalo actually had the temerity to thank the companies for their ongoing assistance during a media interview set up to discuss the fact that the TGR report had found no evidence to substantiate OUTA’s claims of corruption.

Meanwhile, on the ground, the situation is so bad, as the following limited examples show, that in some places like the University of Johannesburg, students are literally starving because they are getting no money and students from several universities admit in media reports that they are forced to work as prostitutes in order to be able to buy food.

Students at Sol Plaatje University have barricaded the streets, offices at the Durban University of Technology have been torched, and there is accommodation chaos across the country as a result, in part, of the four financial providers’ inadequacies.

Across the 26 universities and 50 TVET colleges, students are forced to protest in utter desperation against the institutions that must shoulder the brunt of NSFAS’ ineptness. Such protest will no doubt result, as evidenced perennially, in violence and infrastructural damage to these institutions.

Erosion of HE budget

It is remarkable how ironically South African it all is: the universities are being punished by the failures of the NSFAS system. Furthermore, their Department of Higher Education and Training (DHET) grants were cut in the last medium-term budget to be redistributed for early childhood development programmes. And yet the victimised students intend to protest at each and every university, all of which are also victims of the NSFAS system.

As the Centre for Risk Analysis points out, universities’ own grant subsidies stand at 30.8% (ZAR44 billion) of the DHET budget, while the NSFAS budget is at 41.2% (ZAR51 billion).

This means that, for the first time in the history of South African higher education, more money is being given to NSFAS than is being given to universities for the running of their institutions. This raises huge red flags as DHET budget cuts and cash flow constraints will start impacting on institutions of higher learning.

The consequences of such a poorly conceived and unsustainable plan will become increasingly evident over time. University budgets will erode, leading to inevitable disastrous outcomes.

Universities will be compelled to act pragmatically, including rationalising budgets and staff structures, not filling vacancies left by retiring and resigning staff, and relying more heavily on postdoctoral and temporary staff for core academic functions.

Additionally, with 1.2 million students currently in the university and TVET college sectors, the student-to-staff ratio will continue to rise, adversely affecting the quality of tuition and student success rates.

NSFAS has no integrated data management system for the higher education sector and it relies exclusively on the data management systems of universities and TVET colleges to identify which students are eligible for which allowances. It is clear to everyone in the sector that this fragmented system is counterproductive and incomprehensible.

Gross exploitation of students and universities

Instead, we have another report that attempts to patch over the gross exploitation of our students and universities. The TGR report exonerates Khosa (with a mild slap on the wrist), evaporates the money that is referred to in the leaked tapes and sets out to dismantle each and every claim in the OUTA report in sometimes incomprehensible turns of phrase:

“264. A further issue considered by OUTA in its report from the recordings was that Khosa and the Minister received money from the service providers. OUTA has taken this from the conversation that took place between Ntumba and Maluleke during the second meeting prior to the arrival of Khosa. OUTA could not have lent any credence to this talk which was so incoherent and making little sense, if at all (our emphasis).”

And, in the background, we have Andile Nongogo, the fired CEO of NSFAS and former CEO of the looted Services Sector Education and Training Authority (SETA), appealing to get his former position back.

While the minister searches for someone else to blame, the focus should be on the corrupt enabling structures that perpetuate this dysfunction. The minister has done nothing substantial to address the core issue: NSFAS, as a government entity, should be taken over by the DHET university branch, which already disburses billions of rands annually to universities with significant accountability measures in place.

Funds should be dispersed to the universities, as they were historically, where accountability measures can finally eliminate this history of corruption. This move would ensure transparent and efficient management of financial aid, minimising opportunities for corruption and ensuring that the aid reaches the students who need it most.

This is the obvious solution, yet the minister looks everywhere but at the most effective course of action.

Betraying the wisdom of the Stoics

Drawing on the wisdom of the Stoics, we find guidance in confronting the deeply rooted corruption and inefficiencies plaguing NSFAS. Marcus Aurelius once wrote, “Waste no more time arguing what a good man should be. Be one.”

This principle of immediate, effective action must be applied to NSFAS. Superficial changes will not suffice; the organisation requires a profound transformation to address its deeply embedded issues.

Epictetus taught that, “Wealth consists, not in having great possessions, but in having few wants.”

The current system, marked by extravagant offices and mismanaged funds, betrays this wisdom. By redirecting resources towards genuinely supporting students and universities, we can build a system that embodies ethical governance and accountability.

The existing fragmented and unaccountable structure perpetuates dysfunction and exploitation, betraying the trust of South Africa’s most vulnerable students and undermining the integrity of higher education.

In the spirit of resilience and integrity, it is imperative to dismantle the structures enabling corruption and build a system that truly serves the needs of students and universities. Through decisive and comprehensive action, we can restore credibility and functionality to NSFAS, securing a brighter future for South Africa’s education system and its students.

Dr Linda Meyer is the managing director of IIE Rosebank College and Patrick Fish is an educational consultant.