IRREGULAR Nsfas digital transformation: hiring bank card provider

According to an investigation by the Organisation Undoing Tax Abuse (Outa), the hiring of a service provider to give out bank cards to National Financial Student Aid Scheme (Nsfas) beneficiaries was irregular.

Early this month, Nsfas announced that as part of its digital transformation, all its beneficiaries at universities and TVET colleges would start receiving their allowances and transacting through the scheme’s bank card as of this academic year.

However, Outa said its investigation had found that Nsfas hired service providers without them having the required banking licences to pay out student allowances at excessive rates relative to the market.

It further claimed that the scheme also hired a business which provided cloth masks to the National Treasury in 2020 to work on an ICT contract and rented an expensive head office space while slashing the subsidies for student accommodation.

Outa’s portfolio manager Rudie Heyneke said the organisation questioned the value of these contracts, particularly in light of the Nsfas reduction of subsidies for student accommodation.

He said Nsfas hired businesses without VAT registrations to make direct payments of student allowances, which offered students more expensive accounts than what was available from four of the biggest commercial banks in the country.

“Outa calculates that this deal could be worth as much as R1.5 billion over five years, just to provide students with access to a Nsfas bank card. This will be paid directly by the students out of their allowances, as the costs are deducted from their bank accounts. It is not known who will carry the costs for the manufacturing of the cards, whether it’s Nsfas who are taxpayers or the students through direct debits on their accounts,” he said.

Heyneke added they believed that students were being locked into very expensive deals aimed at benefiting the service providers, and not the students, which enriches the new, inexperienced companies, who stand to rake in hundreds of millions of rand at the expense of students and taxpayers.

Heyneke said Outa started investigating Nsfas’ tenders after a lengthy probe into a large Services Sector Education and Training Authority (SSETA) tender with the Grayson Reed Consortium, which was used to open a criminal complaint with the SAPS in November 2022.

“We found the service providers were linked to other tenders among the SSETAs and Nsfas and followed those links. The two organisations all fall under the department of higher education and training and receive massive public funding. They all perform a crucial function in helping young South Africans to receive training and education and become employable,” Heyneke explained.

He said as an organisation, they also had a look at three tenders: a five-year contract for the direct payment of Nsfas allowances to students, which Outa believed could be worth at least R1.5 billion, a three-month contract to supply a digital tool to calculate student allowances and the leasing of the Nsfas head office for two years, renewable for a further three years.

“The Special Investigating Unit has since August 2022 been investigating Nsfas and we believe that these tenders should form part of their investigation.”

City Press tried to contact Nsfas for comment, but they did not respond at the time of publishing.

Credit: https://www.news24.com/citypress/news/outa-accuses-nsfas-of-benefiting-service-providers-at-expense-of-students-20230217