NSFAS Payment System Chaos Unveiled by OUTA Report

NSFAS Payment System Chaos Unveiled by OUTA Report. The National Student Financial Aid Scheme (NSFAS) implemented a novel payment approach to enhance the distribution of student allowances. However, the allocation of tenders to handle NSFAS allowances is generating concerns.

Introduction of the New Payment System:

In 2022, NSFAS introduced a direct payment system for student allowances, initially piloted at Technical and Vocational Education and Training (TVET) Colleges. Subsequently, the system was extended to universities by June 2023.

Aims of the Direct Allowance Payment System:

The direct allowance payment system aimed to simplify the allowance distribution process for students, instilling confidence in timely payments. Nonetheless, various challenges arose as students grappled with this new system.

Partnership and Complaints:

NSFAS collaborated with four service providers to implement the direct allowance payment system. However, students reported high bank charges from these providers and encountered difficulties accessing their allowances.

OUTA Investigation – Initial Findings:

In October 2022, the Organisation Undoing Tax Abuse (OUTA) conducted an investigation into the NSFAS direct payment system. This investigation highlighted that some service providers lacked necessary banking licenses and VAT registrations, along with charging higher bank fees compared to commercial banks.

Updated Investigation Findings:

OUTA has released an updated version of their investigative report, asserting irregularities in the tender process for allowance payment.

Chaos Caused by Rollout:

OUTA’s report underscores that the rollout of the direct payment system led to substantial chaos, prompting numerous students to call for its abandonment.

Student Concerns:

Students expressed concerns regarding the sudden discontinuation of allowances for previously funded students, exorbitant service provider fees, and delays in allowance payments. Roughly 25% of enrolled students experienced delays in payments.

Changes in Tender Requirements:

OUTA noticed that the number of mandatory requirements for service providers in the tender process reduced significantly. For instance, the requirement for a banking license has been revised to allow submissions from bidders with a banking license, a sponsor bank, or affiliation with a bank.

Implications of Altered Tender Requirements:

OUTA raises concerns over these changes, as they might enable non-registered financial service providers (FSPs) to win the tender. Consequently, some appointed service providers might not fulfill FSP criteria.

Lack of Evidence Regarding Agreements:

OUTA’s investigation revealed a lack of concrete evidence regarding agreements between banks and service providers. Despite extensive efforts, no proof of agreements was found in both the initial and updated investigations.

Uncertainty Surrounding Fee Structure:

Questions have been raised about NSFAS’ failure to disclose the agreed-upon fee structure with service providers.

Alleged Fee Structure Changes:

OUTA’s investigation suggests that NSFAS initially aimed for a monthly fee of R102.35, which was later reduced to R12 due to pressure from students and civil society. Nonetheless, transaction fees on these bank accounts seemingly increased following the account fee reduction.

Negotiations with Service Providers:

Ernest Khosa, the NSFAS Board Chairperson, revealed ongoing negotiations with service providers to ensure value-for-money services for students.

Value-Added Services Negotiations:

NSFAS is in the final stages of negotiations for value-added services that could provide beneficiaries with special benefits from specific stores, such as discounts and promotions.

Involvement of the Special Investigating Unit (SIU):

OUTA’s findings have been shared with the Special Investigating Unit (SIU), which has the mandate to probe into NSFAS’ operations.