NSFAS: Where’s the accountability?

12 April 2024

The Organisation Undoing Tax Abuse (OUTA) welcomes the resignation of the chairperson of the National Student Financial Aid Scheme (NSFAS), Ernest Khosa.

Khosa’s resignation was announced in a statement by the Minister of Higher Education, Science and Innovation, Blade Nzimande. “It looks like Khosa’s resignation was added as an afterthought to the statement, which focused on various issues concerning the non-payment of NSFAS student allowances for April,” says OUTA’s Investigations Manager, Rudie Heyneke.

On 4 January this year, OUTA published a report about recordings of discussions that Khosa had with two individuals on internal NSFAS decisions and actions taken by the NSFAS board against the former CEO, Andile Nongogo. During these conversations it was also mentioned that gratification was paid to Khosa, Minister Nzimande, and the South African Communist Party (SACP).

A week later, on 11 January, Khosa announced that he would take 30 days leave of absence to enable the NSFAS board to do an investigation regarding his conduct. He emphasised that his leave of absence was not an admission of guilt. Prof Lourens van Staden was appointed as interim chair of the NSFAS board on 14 January amidst increasing public pressure about the situation at NSFAS.

Shortly after his appointment, Prof Van Staden announced that the board appointed TGR Attorneys to investigate the allegations against Khosa. The firm was instructed to report back to the board in 30 days.

While Thula Nthumba (married to the one of the directors of Coinvest, a financial service provider for the payment of NSFAS allowances to students) was named in OUTA’s January report as one of the two men secretly meeting with Khosa, the identity of the second man (Mr C) has thus far only been shared with law enforcement authorities and TGR Attorneys, who interviewed OUTA early in March.

“We supplied law enforcement authorities as well as TGR with all the information we have, and can now identify ‘Mr C’ as Joshua Maluleke, a businessman and member of the board of directors of the OR Tambo School of Leadership, an institution closely linked to the ANC. Maluleke is also a co-director of Zipsilor, a company implicated in corrupt activities regarding National Lottery funds that were earmarked to build a rehabilitation centre in Soshanguve, which never saw the light of day.  Maluleke is also an active business partner of the President’s brother, Douglas Ramaphosa, a fellow director at the OR Tambo School of Leadership and well-known businessman who serves on several other boards in the private sector.

Heyneke says Khosa’s resignation seems to be a case of history repeating itself. “In 2005, he also resigned from the Mpumalanga Economic Empowerment Corporation (MEEC), days before a forensic investigations report by PWC on allegations of corruption against him was due to be released.”

OUTA believes that the TGR report on Khosa should be made available to the NSFAS board imminently, if not already handed over. “We trust that this report will be released to the public and not kept under wraps, as was the case with the Werksmans report which investigated allegations against NSFAS CEO Andile Nongogo,” says Heyneke.

OUTA also calls on the SIU to include the allegations against Khosa in their NSFAS investigation that was proclamated by the President in 2022. If Khosa or any other NSFAS employee is found wanting, they must be held to account. The Minister should also consider a delinquent director application against Khosa.

“South Africans have seen far too often that implicated persons in high profile positions resign when there are adverse findings made against them, merely to return to positions of power some years later. These positions often are those of a non-executive director on the board of another state entity. Khosa is an exceptional example of this since he is also the chairperson of the board of the South African Civil Aviation Authority (SACAA).” 

With reference to Minister Nzimande’s statement that he is “deeply disturbed by the recurring problems of non-payment of student allowances”, Heyneke points out that the October 2023 Werksmans report recommended the termination of the contracts of the fintech companies appointed to manage the direct payments of student allowances. “To date nothing has been done regarding these recommendations, other than several mentions that it will be implemented. Ernest Khosa as well as the acting chairperson said this on various occasions and on different platforms. When will this happen, and when will the rest of the Werksmans recommendations be implemented?”

OUTA says it believes that the payment of allowances to students can and should be managed by NSFAS internally without a third party being involved.

“If NSFAS cannot fulfill this function, what is the point of their existence? Thousands of government employees get paid on time every month – why can’t a system like Persal be used to pay student allowances? Why must functions like these always go out on tender to third parties, with middlemen transactions that inflate costs to the taxpayer?”

Non-payment of allowances (in some cases dating back to 2023) as well as ongoing accommodation problems at various institutions have been the cause of ongoing student protests since the start of the current academic year. Countrywide protests as well as student marches in Cape Town (to the NSFAS headquarters) as well as Pretoria (to the offices of the Department of Higher Education and Training) have been scheduled for today (12th April).

“Students are angry at NSFAS, and urgent intervention is needed,” Heyneke says.

He says leadership stability should be prioritised if government wants to fix the chaos. “For the last two years, NSFAS made headlines for all the wrong reasons. A student accommodation crisis has arisen, due to a cut in the accommodation allowance in January 2023 was followed by the non-payment of monthly allowances since June 2023, all because four inexperienced service providers were appointed for the task. This year, a new accommodation crisis arose because NSFAS launched its own student accommodation portal. In all of this, NSFAS management and the Minister seem set on ignoring public pressure or warnings from OUTA and others, including the recommendations of the Werksmans report. Yet again, students bear the brunt of financial mismanagement, all because same inept service providers are allowed to disburse payments yet again. When will this end?”

Minister Nzimande instructed the board in January to appoint a new CEO – yet almost four months have passed with no appointment. “The current acting CEO, Masile Ramorwesi, has been implicated in the award of the tender to the four fintech companies, and the Werksmans report recommended that action be taken against him and other members of the Bid Evaluation Committee (BEC). The victims of NSFAS’s leadership crisis and inability to execute its statutory mandate are the NSFAS beneficiaries, the very people this scheme is supposed to assist.”

Heyneke says OUTA has “serious doubts” that Minister Nzimande’s decision to put NSFAS under administration will result in a turnaround of the institution. “This means that the board will be dissolved, and the board’s duties will be taken over by a single person acting as the administrator. Nzimande placed NSFAS under administration in 2018, which resulted in some success, but it was reversed again by his appointment of Khosa as board chair and Nongogo as CEO. He dealt with problems at the Construction SETA by placing it under administration, and recently he attempted the same at UNISA, although the court overturned this decision. It is clear to us these ’administration’ decisions have not resulted in a permanent turnaround of these institutions. We believe it will not be different with NSFAS. Ethical leaders with integrity are the answer, but as seen in the past, this is not the minister’s criteria when finding solutions for these problems.”

Heyneke also points out that the Auditor-General has given NSFAS a qualified audit with adverse findings for the 2021/22 financial year, while the 2022/23 audit is still outstanding. “It should be noted that NSFAS received a clean audit under Dr Randal Carolissen, the previous administrator of NSFAS, who was appointed in 2018 but subsequently pushed out. Nzimande’s appointees (Khosa and Nongogo) took over the leadership in December 2020. In three years under them NSFAS went from a clean audit to a qualified audit with adverse findings. Why?”

OUTA will keep a close eye on the appointment of an administrator for NSFAS and will do all background checks and due diligence on any candidate appointed by Nzimande. “NSFAS has a direct influence on the lives of at least a million young people. Indirectly, the scheme touches the lives of at least two or three million more people. This is why it cannot be allowed to fail, and why OUTA will continue to expose irregularities and corruption and holding those responsible to account,” Heyneke says. “OUTA once again urges students to refrain from violence during the protests, and to vote for new leaders with integrity in May. That is the only way we can ensure a functional NSFAS in future.”

Background
On 4 January 2024, OUTA released its report on the recordings on NSFAS. See our statement here.
OUTA’s report on the NSFAS recordings can be found here: main report, annexure A (report on the Services SETA), annexure B (preliminary report on NSFAS), annexure C (report on SSETA and Star Sign and Print), annexure D (report on SSETA and Five Star) and annexure E (report on NSFAS direct payment contracts).
Key extracts from the leaked recordings are here: meeting one and meeting two.
The full recordings are here: meeting one and meeting two.
In February 2024, OUTA said it stands by its report on NSFAS and would not withdraw it as demanded by Ernest Khosa. See here.
During 2023, OUTA's investigations implicated then CEO of NSFAS, Andile Nongogo, who was subsequently fired. See more here.
More on OUTA's criminal complaint against Andile Nongogo is here.
More on OUTA's work on NSFAS is here and on the Services SETA is here.

Issued by Rudie Heyneke, OUTA Investigations Manager, 12 April 2024