Sameera Casmod | sameerac@radioislam.co.za
09 August 2023 | 11:33am SAST
2 min read

Picture: NSFAS

An investigation was launched to conduct an inquiry into the National Student Financial Aid Scheme’s (NSFAS) direct payment of allowances to student bank accounts. The investigation revealed that the companies awarded contracts for this service are non-registered financial service providers and relatively new firms, raising questions about their legitimacy and transparency.

In an interview on Radio Islam International this morning, the Organisation Undoing Tax Abuse’s (OUTA) Investigation Manager Rudie Heyneke discussed the concerning findings of the investigation.

The controversy surrounding the direct payment system prompted students to march to the union buildings in Pretoria last week, seeking answers and accountability. Rudie Heyneke shed light on the investigation’s background, explaining that OUTA requested NSFAS’s tender documents through a formal application but was denied access. Despite internal appeals, OUTA decided to collaborate with the Special Investigating Unit (SIU), which had a mandate to investigate NSFAS. The accumulation of information led to the release of an updated report detailing their findings.

The investigation highlights several key issues. The Sunday Times reported that NSFAS awarded renewal contracts to four companies to pay allowances directly to student bank accounts, resulting in substantial monthly profits through banking fee deductions. However, OUTA’s investigation exposes that these companies are not registered financial service providers and are relatively new entrants to the market. This has led to concerns about their qualifications to manage the financial transactions of students.

Of particular concern is the lack of transparency in the selection process. OUTA suggests that NSFAS’s tender process allowed non-regulated fintech companies to enter the market, potentially compromising the safety and reliability of the payment system. The investigation also revealed questionable practices, such as the appointment of a black woman as the sole director of a company just before the tender submission, only for her to resign shortly thereafter.

Heyneke also brought attention to the absence of clear agreements between the service providers and banks, despite claims of collaboration. This lack of transparency raises concerns about accountability in the event of issues or failures in the payment system. The risk extends not only to the students but also to taxpayers who fund the scheme.

Furthermore, OUTA’s investigation points out a reduction in the number of mandatory requirements for the latest tender. With only five mandatory requirements compared to the previous 20, the potential for risk and irregularities increases. Among the requirements is the need to appoint a subcontractor holding 50% of the contract, raising questions about the role and contribution of these subcontractors.

Financial implications for students also came under scrutiny. While NSFAS announced a fixed fee of R12,00 per month per student, the investigation revealed additional transaction fees imposed by service providers. Some of these providers were not registered for value-added tax (VAT) but still charged the same fee, leading to concerns about the legality of such charges. For financially vulnerable NSFAS-funded students, these fees translate to a significant portion of their allowances.

In total, the investigation estimates that students collectively stand to lose around R60 to R80 per month, resulting in a projected total deduction of approximately R3 billion over the next four and a half years.

Listen to the full interview on Sabaahul Muslim with Mufti Yusuf Moosagie here.