DA calls on Minister Nzimande to suspend NSFAS contracts pending SIU outcome

14 August 2023

The damning report of the Organisation Undoing Tax Abuse (OUTA) on the NSFAS direct payment tender and relationship between NSFAS CEO Andile Nongogo and Coinvest Africa must be seriously considered by the Minister of Higher Education, Dr Blade Nzimande. In light of the OUTA investigative report, Minister Nzimande must instruct the NSFAS board to temporarily put aside the contracts of Coinvest Africa, Tenet Technology, Ezaga Holdings and Norraco Corporation until such time the Special Investigating Unit (SIU) and the Public Protector investigations are completed.

Minister Nzimande’s mandate as the accounting authority of the higher education and training sector is to ensure that not student is left behind or financially deprived.

OUTA’s report lays bare:

How well-established banks applied three times to handle the direct payment system into students’ own bank accounts;

How the third tender notice was glaringly changed from the previous two bids – no requirements to be a financial service provider, only a sponsored bank is needed to tender. This opened up the door for companies with no banking or fintech experience to apply.

More than 1 million students receive funding from NSFAS, it therefore only makes sense that well established service providers like ABSA Bank, Nedbank, Standard Bank or First Rand Bank who applied should have been awarded the tender. This would have lowered the costs to students. A clear comparison is highlighted in the OUTA report.

The OUTA report also highlighted:

Tenet Technology and Noracco Corporation is not registered for VAT at SARS;

Access Bank, the sponsor bank, is not listed as an official bank with whom the state institutions can transact;

Sub-contractors as stipulated in the contract is not mentioned by any of the four service providers;

The fee structure was discussed well in advance and these were deliberately not communicated to students, institutions and the higher education parliamentary portfolio committee;

The professional indemnity of R20 million is inadequate considering these service providers will rake in R1 billion per month from service fees;

NSFAS direct payment scheme will cost students R3 billion for the remainder of the service provider’s contract period; and

The four service providers’ contracts not only relates to the direct payment scheme but the scope was extended to deal with student accommodation accreditation services – the tender on this need to be questioned.

In light of the briefly highlighted findings, we call on:

The Minister to exercise his duties to take students’ concerns to heart and call for the immediate suspension of these contracts;

We also call on SARS to investigate possible tax evasion of the two service providers;

The Minister of Finance to clarify if Access Bank can conduct business with state institutions; and

The Financial Sector Conduct Authority to give clarity on the position of these service providers, their alliances and services provided to them, as recommended in the OUTA report.

We ask again if this is NSFAS capture 2.0?

We will not allow funds meant to better the economic prospective of the poor and the working class be squandered, leaving many to be erroneously defunded in the middle of an academic year.

We need answers and we need them now.

Issued by Chantel King, DA Shadow Minister for Higher Education, 14 August 2023