Picture: OUTA

Updated investigation report on NSFAS direct payment scheme

In October 2022 OUTA released an investigation report on the NSFAS direct payment scheme. In the same month, we requested all the tender documents relating to this payment scheme in terms of the Promotion of Access to Information Act (PAIA). However, NSFAS denied our request, as well as the internal appeal lodged in December 2022.

OUTA believes these tender awards were irregular, and we question whether these tenders are not unnecessarily draining NSFAS resources and contributing to the dilemma many students find themselves in currently.

We have been sharing all the information we have gathered on these tenders with the Special Investigating Unit (SIU), which has a proclamation to investigate NSFAS.

At the time, our main concerns with the new direct payment system were:

• NSFAS hired businesses without banking licences or VAT registrations to handle the direct payment of student allowances.

• These businesses charge students higher fees than what four of the biggest commercial banks in the country would.

• OUTA calculated that this tender could be worth as much as R1.5 billion over five years. This is the estimated cost just to provide students with access to a NSFAS bank card, which students will have to pay directly out of their allowances, as the costs are deducted from their bank accounts.

Despite OUTA’s concerns, which we shared with NSFAS and the SIU and to which we alerted the public in October 2022, NSFAS went ahead and introduced the new direct payment system with the four new service providers by the end of June 2023. The rollout caused total chaos, with thousands of students calling for the scrapping of the system.

The students' main concerns include previously funded students who were suddenly not receiving allowances anymore, the excessive fees charged by the service providers, as well as the late payment of allowances – about 25% of onboarded students were not paid on time.

As a result of the huge public outcry by students and at the request of several entities, OUTA decided to update its 2022 report with new information revealed by our ongoing investigation. This is information we gathered despite the refusal by NSFAS to grant us access to tender information as requested through PAIA.

This report details the differences between the current tender that was awarded to Coinvest Africa, Tenet Technology*, Ezaga Holdings and Norraco Corporation, and the two tenders for a similar service (direct payment of student allowances) which was cancelled.

One of our findings is that the cancelled tenders had 20 mandatory requirements that had to be met by service providers, while the current tender has only five mandatory requirements.

The requirement to have a banking licence was changed to having a banking licence OR a sponsor bank OR an affiliation with a bank, opening the backdoor for bidders who are not registered as financial service providers (FSPs) to submit their bids. As such, the appointed service providers were awarded a tender without being FSPs.

Furthermore, OUTA couldn’t find proof of any agreement between any bank and the service providers in November, and also not with the latest investigation. The only “proof” is a notice in fine print on some websites of the service providers that they are affiliated with Access Bank or another fintech company called Ukheshe.

To date, NSFAS has not published the agreed fee structure it has with the service providers. As our report will show, NSFAS was determined to adopt a monthly fee of R102.35 when the tender was awarded. After pressure from students and civil society, the monthly fee was decreased to R12, but it seems that the transaction fees increased drastically.

OUTA’s comparison between the fees of the NSFAS bank card and commercial banks was also updated to include the 2023 fee structure of three South African banks that are offered to students. Although there were increases on certain transactions from the last comparison, the fees and value-added services of the NSFAS bank card still cannot compete with what is on offer at commercial banks.

In addition to the investigations undertaken by OUTA and the SIU, students have launched new actions. William Sezoe, vice-chairperson of the Stellenbosch University SRC, submitted a complaint to the Public Protector with the support of the SRC, while Action SA announced that they will approach the high court to review the NSFAS decision to implement the scheme and the awarding of the tenders.

The full report with its annexures can be found here.

More information

A soundclip with comment by OUTA’s Rudie Heyneke is here.

* Note that NSFAS contractor Tenet Technology is not the same company as Tenet (Tertiary Education and Research Network of South Africa). See the court order obtained in August 2023 in the Western Cape High Court by Tenet against Tenet Technology over use of the name here.