Update by Minister of Higher Education on National Skills Fund and NSFAS investigations

Meeting report

Minister’s opening remarks

Dr Blade Nzimande, Minister of Higher Education, Science and Technology, commenced by reminding the Members of the mandate of the Department. It seeks to improve the capacity of the post-school education and training (PSET) system to meet the skills needs and development of the country. The Department of Higher Education and Training (DHET) would therefore identify the following medium-term goals:

• Building an integrated and coordinated PSET system;
• Expanded access to PSET opportunities;
• Improve the success and efficiency of the PSET system and its quality;
• Building a responsive PSET system;  and
• Excellent business operations within the Department

The National Skills Fund (NSF) and National Student Financial Aid Scheme (NSFAS) were two of the most important enablers of the Department to achieve its mandate, so it would be in the interests of the Department that these entities functioned effectively and managed their finances prudently.

The DHET was steadfast in dealing with instances of maladministration and corruption. In doing so, he had appointed Nexus to conduct a full-scale forensic investigation on the nature of transactions of ten projects of the NSF. This followed the AGSA’s report into the financial affairs of the NSF after R5 billion could not be accounted for over two consecutive financial years. He had also appointed a Ministerial Task Team to conduct a strategic review of the NSF – its general operations, efficiency and relevance, in line with the national skills priority of the country.

He had made these appointments to ensure the NSF accounts for its resources, and addresses maladministration and corruption. Both reports had been submitted to the Ministry, and the recommendations were instantly implemented. The Nexus had directed the DHET to do two main things, which were to act on internal staff members who were found wanting, and to hand the matter over to the Hawks. The latter had been done. Consequence management of the malfeasance had been followed, and the former Director-General (DG) was subsequently suspended, and his contract ended on 6 September 2021. The former NSF chief executive officer (CEO) was placed on precautionary suspension on 1 August 2021, but he had decided to resign from the entity in June 2022. An acting CEO had been appointed, and before the end of the year, a permanent CEO would have been appointed.

The DHET had further established an independent legal panel to investigate how to deal with what had come out of the report as clear shortcomings on the part of the NSF leadership. Advice was also received from those who had already left the entity. Six officials were placed on precautionary suspension in October 2022. He was delighted to report that the Hawks had submitted its progress report last week. The legal panel had investigated all the companies singled out, and their bank accounts, and had followed the money trail. The Hawks had further referred the matter to the National Prosecuting Authority (NPA), which would decide how to proceed.

The Ministry and the DHET welcomed the Hawks report and the prosecutions beginning. The Department had responded to all the cases raised by the Standing Committee on Public Accounts (SCOPA). Any further actions or legal requirements to be taken by the Minister and the Department would be done. He was also reporting on the Ministerial Task Team on strengthening the NSF and the PCHET regularly.

National Student Financial Aid Scheme

Minister Nzimande said that during the presentation today, NSFAS would be presenting its annual report for 2021/22. However, it was important to note that NSFAS had experienced significant delays in compiling its annual financial statements and audits for this period. The primary reason for the delay was to enable it to complete the financial close-out process for the academic years from 2017 to 2021. The close-out report resulted from the changes made to NSFAS following the Presidential pronouncement, which affected the Scheme's systems and technological environments.

While NSFAS had understandable reasons for the delay, a significant portion of the issues it faced arose from the announcement of a new Scheme on 16 December 2016, which was to be implemented on 2 January 2017. NSFAS had only two weeks to adjust from a loan to a bursary scheme, and the threshold for qualifications was increased. Policy issues should have been dealt with, and although nobody was being criticised for this, it had been practically impossible for NSFAS to adjust in two weeks with such massive changes. This had created a lock jam and backlog on numerous matters.

The project was meant to deal with data challenges and the implementation of a student-centred model for the 26 universities and 50 technical and vocational education and training (TVET) colleges. He was pleased that the 2020/21 report of the Auditor-General of South Africa (AGSA) was done, and the AGSA had also briefed him about what was contained in the report and its challenges.

NSFAS had received an unqualified audit opinion, which was a significant achievement for the Scheme. This audit outcome was the first for NSFAS since 2017, and two years of administration from 2o18 to 2020. The AGSA had noted improvements in the overall audit outcome compared to prior years regarding financial reporting. The AGSA had also raised the issue of the capacity of NSFAS.

The information technology (IT) system posed a challenge for both NSFAS and institutions. It would be ideal to have a single IT system shared between NSFAS and institutions, making it easier to exchange data. This system should also include the sector education and training authorities (SETAs), to prevent the occurrence of double-dipping of bursaries. Currently, this issue is not easily detectable since the IT systems are not aligned. The latest AGSA report has been included in the Scheme's action plans to address the PSET system. The expectation was that NSFAS would deliver no less than optimal performance, and the NSFAS board had been urged to adhere to the deadline for the extension of submission of the annual report for the 2021/22 financial period.

National Skills Fund

Dr Nkosinathi Sishi, Director-General, DHET, assured Members that the Department worked well and was fully compliant with the AGSA. He provided a background to Nexus Forensic Services, which had been appointed by the Minister on 1 March 2022 to carry out a forensic investigation on the nature of transactions of ten NSF skills development projects. The investigation had been prompted by the AGSA's disclaimer audit reports on the NSF in the 2019/20 and 2020/21 financial years.

The full report of the forensic investigation from Nexus was presented to the SCOPA on 20 October 2022. The DG of the DHET provided a clear direction concerning managing the implementation of the forensic report’s recommendations. He also shared some updates on the implementation of consequence management.

In the ten projects sampled and examined, the forensic investigation concluded that six NSF and DHET officials who were entrusted with the responsibility of project monitoring, amongst other things, had failed to exercise a duty of care and due diligence in accordance with the respective Memoranda of Agreement (MoAs). Following this conclusion, five officials were placed on precautionary suspension in October 2022, and one in November, on various charges. Further investigation absolved two officials as no concrete evidence was found, and their suspensions were lifted in July this year.

One official had entered a plea bargain and repaid R7 220, with a written warning. The offence had been to recommend a supplier who had submitted a quotation higher than the other suppliers without following due processes. Another official who, by association, was also implicated in the recommendation of a higher quotation without following due processes, had pleaded guilty and was sanctioned to one month without pay.

Another official was dismissed outright and subsequently filed an appeal. The disciplinary hearings of two senior officials at director level were scheduled for 25/26 October and 7/8 November, respectively. The review of other projects was continuing.

[See the presentation for details]

National Student Financial Aid Scheme

Dr Ernest Khosa, Chairperson, NSFAS Board, said that the delegation was appearing without its Chief Executive Officer. The night before the meeting, the Board had decided to terminate the CEO's contract due to policy and trust violations. This information helped to contextualise the entity's recent shortcomings. He assured Members that all these challenges were being addressed, and that the organisation was acting on directives from the Minister and Department, particularly regarding the IT and appeals systems. This also included improving the responsiveness of the enquiry system.

Non-tabling of Annual Reports

• Significant delays were experienced in concluding the compilation of Annual Financial Statements and audit for the 2021/22 financial period.
• The main reason for the delay was to allow NSFAS to complete the financial close out process for the academic years 2017 to 2021.
• Following the implementation of the student-centred model and the 2018 Presidential Pronouncement, NSFAS was not able to close off the above periods as the systems and technology environment was no longer fully aligned with the revamped processes.
• NSFAS had, in previous periods, placed reliance on data received from institutions relating to the amounts it owed and was owed, but subsequently followed a more in depth reconciliation process.
• The delays relate to the reconciliation process between NSFAS and institutions and were done at a detailed level.
• The audit was however recently concluded on 31 July 2023 and the Annual Report has been reviewed by the AGSA.
• The 2021/22 Annual Report will be presented to the Board and its committees during the meetings scheduled in October 2023.
• The 2021/22 Annual report will then subsequently be shared with the Minister.
• The 2022/23 audit is yet to commence in 2024. As a result of the delay in concluding the 2021/22 audit and the impact on the opening (roll forward) balances of 2022/23, NSFAS requested that the AFS submission be delayed to allow sufficient time to include remediations for findings identified.
• The 2022/23 AFS is to be submitted to the AGSA in January 2024, after which the audit will commence. Therefore, the Annual report for the 2022/23 financial year is expected to be concluded by 31 May 2024.
• The legislated reporting timeline will then resume for the 2023/24 financial year

Performance of the entity

NSFAS is not able to report on the performance of the entity as it is linked to the annual reports which have not been tabled.

Members were taken through an update on the SIU investigations. NSFAS has granted the SIU access to our various systems to aid in obtaining student data in support of the loans and bursaries made to previously funded NSFAS students. Thus far, the SIU has recovered R97 023 735.07 which is held in its trust account. During a recent engagement with the SIU, NSFAS informed that the recovered money would be returned to NSFAS. NSFAS has requested the SIU to make repayments to the NSFAS monthly to which the SIU responded that it will not be possible. NSFAS is awaiting a response from the SIU’s Chief Financial Officer as to why monthly repayments cannot be made to the NSFAS and what other options are available to us

It should be noted that the SIU publicly claims that it has recovered R428 915 824.01 in favour of the NSFAS, however, this amount is based on the payment of R331 892 088.94 that was made directly by the University of Johannesburg to the NSFAS based on the work that was done by the NSFAS Finance team. The NSFAS communicated the recoveries process that will be applied during the SIU investigation. This communication was shared with all institutions in a circular and is as follows:

• All recoveries will be made by the SIU only
• In instances where the institutions can readily identify NSFAS funds in their possession, the funds should be separated from the other funds held by the institutions.

The funds should be deposited into a separate bank account held in the name of the institution. At the conclusion of the Close Out Process the results of the calculations will be joint with the separated funds and paid directly to the SIU’s trust account by institutions. The SIU, in turn, will return the recovered funds to the NSFAS. The bank confirmation letter, as provided by the SIU, was also shared with the institutions.

All invoices up to 31 March 2023 can be paid immediately of which the process has started. The April – August 2023 invoices will be paid once the unused budgeted funds of the previous financial year have been rolled forward and approved by National Treasury. The main reason for this is because the financials for 2022-2023 are still in progress. The investigation has reached its one-year mark, and the SIU must provide the President with an annual report on the status of the investigation. NSFAS has requested the SIU to provide feedback on the preliminary findings and findings relating to parts of the investigations that have been completed. This will assist NSFAS in the timeous address and resolve of matters that are important to the organisation.

On 29 September 2023, the SIU issued a media statement concerning Motheo College. The following were noted in the media statement:

• The SIU signed an acknowledgement of debt with the College.
• The institution agreed to repay R38 686 477.10
• The repayment will be done over a 24-month period.
• Monthly repayments of R855 679.91 will be made by the institution

It should be noted that, once again, the SIU has issued a media statement concerning this investigation without engaging the NSFAS first. This is in contravention of the letter of engagement between the SIU and the NSFAS. In addition to the above during the deliberations with the institutions, the SIU confirmed to institutions that when media statements are issued concerning recoveries made by the SIU, the names of the institutions will not be mentioned. This will aid in protecting the institutions. The SIU did not uphold this undertaking when the media statement concerning Motheo College was issued. It should also be noted that the intuition wrote to the NSFAS and expressed their dissatisfaction with the SIU media statement and the lack of understanding of the SIU regarding the recovery that the SIU made.

[See the presentation for details]

SIU briefing

Adv Andy Mothibi, Head of the SIU, took Members through the presentation, which covered the findings to date. The findings were mainly on close-out reports, systemic weaknesses identified, interim findings (accommodation), observations and limitations.

[See attached for detailed presentation]

Discussion

Ms V Mente (EFF) asked the SIU, when an institution or persons signed an acknowledgement of debt, if the SIU was satisfied with the utilisation of the allocated funds and if they were utilised for education-related activities.

Adv Mothibi said the money was meant for student funding. In this instance, the findings were that the money was allocated for education, and therefore the money must be paid back. There were instances where interest on the money was used to fund institutions' operations.

The SIU's lead investigator said there must be a separate account, because funds were paid into one account, which also included money for other purposes of the institution. It was thus difficult to identify how much was used for what. However, if the student funding was no longer available in the accounts, it simply meant that the funding money for students was also used for other expenses.

Ms Mente wanted to know if the deviations had been in line with the intention to educate children. Secondly, regarding private persons, how did money meant for children end up in the hands of private persons? What was the character of these private persons?

The SIU lead investigator said that the team had assessed the institution's accounts, which included money allocated for other expenses. The process of analysing these accounts was ongoing. The responsibility lay with the person responsible for the expenditure, who would not be spared if they had used funds allocated for students for operational expenses. The private persons were students who did not qualify for NSFAS, but had applied and received the funding. These students had come forward and signed acknowledgements of debt (AODs) to pay back the money.

Ms Mente hoped a comprehensive AOD report would be submitted to the Committee. She sensed that the NSF was attempting to close the chapter on the R2.5 billion, and this would not happen because the NSF had provided a comprehensive report on R2.5 billion. The Committee had requested the NSF to investigate the projects, and the AGSA had indicated it could not find any documentation or proof to audit various skills development projects. This was in 2019/20, and the Minister had insisted on sourcing a forensic firm, which had come up with a sample of ten projects. This meant the rest was not touched – this was not a study or research. They were investigating people who had stolen the money of the state. The chapter could not be closed until all of them were accounted for. They could not close this chapter on a sample of only ten projects.

She asked how much of the R2.5 billion had been accounted for, and the plan going forward. The consequence management for six officials had been presented, but only one official had been fired. This meant that the forensic unit had experienced challenges with its investigation because, up to this day, it had been indicated that there were inconclusive bank statements and various documents that Nexus could not find. Interestingly, the people found guilty had confessed, but not because of the investigation. It seemed bargaining was done on sanctions that would be applied from those confessions. What was the extent of the crime of the person who was fired and the officials who were sanctioned written warnings?

Ms Mente turned her attention to NSFAS, and said the issue of a middle person posed significant challenges -- when were students going to get their funding allocation directly from the Scheme? She felt that the AGSA had been lenient on NSFAS, because incompetence could not be excused. The entity could not continue employing people who could not prepare financial statements and keep relying on previous information. The reasons for lateness could not be excused, as this had occurred consecutively at NSFAS. Members need a clear plan on what would happen about the annual financial statements (AFS) of NSFAS.

According to the report, she observed that the progress had been slow over the allocation of funds, as well as the interviews of officials who had to face consequences. What had happened to the officials who had processed the funds for ineligible students?

Responses

Dr Sishi said the progress report did not constitute a final report that covered the whole set of maladministration. There were more officials scheduled to appear before the independent panel. The Department was satisfied with the thoroughness of the process, which a judge and legal experts had conducted. What comes out of the process would feed into the criminal investigations that would be pursued. The focus of the independent panel was concerned only with management-related investigations. Most of these officials had gone to monitor these projects and came back with deficiencies.

The Department would provide details on the gap analysis of the IT system of the entity. This analysis also covered all SETAs within the Department. The AGSA’s report stressed that it was critical for the Department to develop a comprehensive IT system to improve administrative deficiencies, especially regarding the issue of double-dipping. The DHET had therefore appointed experts, including the State Information Technology Agency (SITA), to identify the gaps in the system.

The forensic report had sampled ten projects, but the accounting officer had reported this matter to the police, and the Hawks had commenced an investigation to complete other sets of areas that were not initially covered. He could not comment on the report at this time, because it had recently been handed over to the Minister, who must thoroughly study it.

Dr Khosa said that NSFAS was a huge organisation with a vast ecosystem, and some of the challenges experienced emanated from the shift to a bursary scheme. At the University of Johannesburg, it had been discovered that NSFAS was paying for gym fees. The close-out project affected all institutions, and the ability to deal with it must involve collaboration with all institutions, notwithstanding the coordination of the IT system.

The Chairperson interjected that it would handicap the Members if he touched on the AGSA-related matters, as the report had not yet been submitted. He asked that any AGSA-related issues be parked for now until the report was submitted to Parliament.

Mr Masile Ramorwesi, Acting CEO, NSFAS, added that eligible beneficiaries could apply directly to NSFAS and get their allowances directly from NSFAS. Secondly, the NSFAS had not yet received any reports on the officials who had processed payments to ineligible students.

Minister Nzimande said he would request a meeting with Adv Mothibi and his team to iron out some matters on the modus operandi of the SIU. NSFAS and the Ministry were seeing this report for the first time. It would be proper for the SIU to present its report to the Ministry and the entity in question, unless there were compelling reasons not to. A lot of what was contained in the report was work that had already been completed. The Ballim Report had a lot of weaknesses, and the Department was engaging the National Treasury for more money. Budgets were being cut, and the IT system had long been identified and needed a funding allocation. It would be helpful for the SIU to engage the Department on the report before coming to SCOPA, because there were opportunities to enrich the report.

The relationship between SCOPA and the portfolio committees needed to be strengthened. The issues that Ms Mente was raising had been regularly accounted for thoroughly and in detail by the Department and the Ministry to the Portfolio Committee. Perhaps to SCOPA, these may be new issues, but the Department was dealing with them. This was a matter that Parliament should look into by creating synergy between SCOPA and portfolio committees. Otherwise, it made the Department and Ministry look like they were not doing anything. However, a lot had already been shared with the Portfolio Committee. The Ministry was heavily preoccupied with NSFAS because it was crucial to the lives of young South Africans. The administrator’s close-out report on NSFAS included an extensive set of measures that must be implemented. Ideally, they would have preferred a more detailed briefing on these issues, but that was largely the work of the Committee now, not of SCOPA.

The Chairperson emphasised the importance of the checks and balances present in Parliament, which had to be utilised. As Members of the Committee, they could not act as both the players and referees in the Parliamentary process. SCOPA conducted post-mortems, which may overlap with the issues dealt with in the Portfolio Committee. This created a separation, unless a joint meeting was necessary. In essence, SCOPA looked backwards to identify and address issues, while the Committees looked forward to plan and strategise for the future. The Committee urged the Ministry to respond to any issues raised by stating that the matters had already been discussed before the Portfolio Committee, and the Ministry was allowed to respond then. This would counter any public perception that suggests that the Ministry and the Department were not fulfilling their responsibilities.

Further discussion

Mr B Hadebe (ANC) said when he was listening to the NSF report, he had thought great progress had been made in ensuring that money was recovered and those implicated in criminal activities had been brought to book. However, as the presentation unfolded, he realised that it appeared that the left did not know what the right was doing. Both the NSFAS and SIU presentations spoke about a letter of engagement between the two. He was uncertain about the content of that letter, and if the Department and NSFAS would be receiving a presentation only now. He was under the impression that the SIU information had already been reported to the Department and NSFAS, and that they had been party to some of the information to ensure that the SIU concluded its investigation speedily without any bottlenecks. This needed to be clarified. What was contained in that letter of engagement pertaining to the issuing of media statements concerning the investigation? Adv Mothibi had indicated that when the matter had been finalised, the SIU retained the prerogative of communicating directly with the public. Was this part of that engagement letter?

It had been indicated that the Hawks had already referred matters to the NPA, and it was incumbent on it to decide whether or not to prosecute. Meanwhile, Adv Mothibi had told Members that the Hawks dealt with criminal investigations, not maladministration and all other aspects. Based on the proclamation, it appeared as if there were still matters that needed to be pursued by the SIU on maladministration matters. Based on the report received today about the work done by the Hawks, was the SIU still of the view that there was still a need for further investigations on maladministration? It had been seven months since the proclamation had been motivated for this -- was the SIU aware of what was causing the delays in finalising this motivation and being gazetted? Was the proclamation still important and relevant, given the work done by the Hawks?  

He believed that South Africa had a recurring problem with CEOs. Recently, Andre de Ruyter (Eskom) had been in the spotlight for this issue, and now it was Andile Nongogo (NSFAS). A new article alleged that NSFAS was handpicking lucrative contracts. He questioned whether the SIU knew about these allegations, and whether they would be investigated in the proclamation. He feared that by raising issues of maladministration after leaving the entity, Nongogo would become another De Ruyter. He asked if Mr Nongogo had provided any information to the SIU that he had shared with City Press and News24. If not, what was the recourse?

Was the NSFAS board satisfied that the issues raised by the CEO were issues the Board could handle without him having to account for them? When he read the article, he had asked where the CEO was when these issues happened. He found it strange that they had two CEOs repeating the same thing. He blamed those responsible for appointing these CEOs, because it appeared that no due diligence was done in appointing them. When things got hot, they became whistleblowers, not when they were entrusted with the responsibility to protect the public purse.

Lastly, the proclamation stated that some allegations were related to several identified projects -- which projects were these? A number of 30 and 10 were thrown around; there was an issue with the sampling and the number of projects investigated. How many projects were investigated, and was the SIU satisfied that it had considered all possible areas of corruption, or was it dealing only with what had been unveiled of the ten sampled projects? If that was the case, it would be concerning.

The Chairperson said the mistake had been not terminating those contracts. What had happened to those companies? Were there any prosecutions and charges that had been summarily dismissed and ended there?

Ms S Makamba-Botya (EFF) said the Minister had mentioned the issue of system challenges experienced in the Department, and in the SIU report, it was clear that these issues emanated from the glitches in the system. How far was the Department in addressing the system challenges?

She asked about the high turnover of the NSF staff, and the reasons behind such a high turnover at the senior management level.

Ms S Somyo (ANC) said the Minister had made a cardinal point visible in the NSF and NSFAS reports on the improvements registered. However, the system failures at NSFAS had begun to bedevil the social fabric. If the system had been in place for the beneficiaries, NSFAS would not be in this position today. Resolving the IT systems was a matter of urgency. The SIU had noted that a cell phone had been used to capture some funds which had nothing to do with a beneficiary, but the internal capacity would fraudulently manipulate the system.

The close-out report was problematic and required urgent resolution by NSFAS. Surely the Department could intervene to ensure this close-out report was concluded? The AGSA had noted the material irregularity of the payments made for duplicate unit standards. The entity had approved and paid for three modules twice. There were significant areas raised by the AGSA that needed close attention.

SCOPA would like to enhance some understandable cohesion in areas that had been identified. The intention was to sustain the level of accountability, as per the ecosystem.

Ms T Siweya (ANC) referenced page 38 of the SIU presentation, which indicated that a letter was addressed to the chairperson of the NSFAS Board, requesting him to explain in detail what steps the Board had taken to address the various systemic weaknesses, flaws and shortcomings as brought to their attention via the Ministerial report dated August 2021. She wanted to know why the Board chairperson had not submitted this information to the SIU.

Ms A Beukes (ANC) felt that the response on the consequence management for officials was not detailed enough, as suggested by Ms Mente. Secondly, on page 13, NSFAS had indicated that it had asked the SIU to make payments to the NSFAS monthly, to which the SIU had responded that this would not be possible, and she wanted to know why.

The Chairperson said it would be important to emphasise improving communication lines. The presentations of the NSF, the SIU and NSFAS did not talk to each other. Now, a letter has not received a response since 2021. Oversight thrived on perception, and there were gaps among these entities. It seemed there was an ecosystem communication breakdown. It did not sit well with him that the Minister was seeing these matters only here for the first time, suggesting a strained relationship between the SIU and the Department. Members needed to be brought into confidence on the issue of delays on the proclamation that had been motivated by the SIU seven months ago.

This matter would be placed on the agenda for the meeting on 22 November with the Hawks.

Responses

Minister Nzimande said he was not pleased that the meeting had gone over the time he had been requested to be present. He agreed that the IT system matter was urgent, and the Department might have to “steal” some money from the funds awarded to NSFAS. However, putting IT systems in place and depriving about five children of accessing institutions was very difficult, because there was no new money from the fiscus -- instead, there was a 10% budget cut. One could not afford to have an NSFAS that was not functioning.

It was not ideal to criminalise students because they did not qualify for NSFAS, but came from families that could not afford university and TVET college fees. SCOPA should assist the Department in discouraging students and parents who defrauded NSFAS. One could not have a manager at a state-owned enterprise (SOE) whose child was being paid for by NSFAS because the child was registered under uGogo (grandparent), who received a South African Social Security Agency (SASSA) grant. There were many of these cases. While criminalising students may be difficult, one could not encourage corruption.

Regarding the SIU letter sent to the NSFAS board in August 2021, he said it was not the role of the SIU to do that, but of the Minister. The SIU’s role was to seek information to complete its investigation, and once it concluded, it should be able to go back to the Department for engagements. The danger of overlaps in their systems was causing them to double up constantly. The Portfolio Committee saw his DGs more often than he sat down with them. Information sharing was encouraged, but it needed to be balanced with independence.

He did not want to share further information on the work that must still be done by the SIU, and which may already have been done. He cautioned against not violating Section 195 of the Constitution, which states one must use government's resources prudently. He did not have a problem with the SIU, but found himself throwing money at things already done. After analysing the powers of the Hawks, he realised there was no distinction.

He felt that the Department had done what it had promised, and he had nothing to hide. However, government resources needed to be used prudently. He was unsure whether anything new would come out of the SIU proclamation.

Some of the people they were chasing through the NSF investigation were community-based people with community-based skills development programmes. The NSF did not have the capacity to back these people up with additional resources, and they had ended up not using the money correctly. The issue of capacity building for poor communities was one of his biggest headaches. Since he arrived at the Department, the NSF had been his biggest headache.

The Chairperson welcomed the issues raised by the Minister. Regarding the law enforcement agencies concerned, it was the position of SCOPA that these agencies, with their overlapping mandates, must be a pool of resources to support investigations in the entire value chain, which would lead to conclusions of these matters. Central to this was the anti-corruption task team. If the law enforcement agency value chain was effective, some of the double-dipping and issues stemming from ineligible students being incorrectly funded, would be avoided.

NSFAS Board

Dr Khosa responded on the SIU letter issue, and said NSFAS had a healthy relationship with the SIU. He had received the letter around 10 October, dated 9 October, and it had given the Board 14 working days to respond. The Board had not gone over the 14 working days yet.

Regarding the termination of the CEO, the Board had satisfied itself because it had allowed the CEO to respond. All the processes and rules had been followed. Regarding the NSFAS lucrative contracts being handpicked, he said this had never been the case -- it may refer to offtake agreements, which was a response to the challenge that the SIU had observed. One of the challenges that NSFAS had was the inability to account for its students who stayed at various accommodation facilities, and something urgently needed to be done. This was why the offtake agreement idea came about -- to collaborate with accommodation providers to provide accommodation in line with the guidelines. This had not happened, because the nature of an offtake agreement for NSFAS required that it had some 20-year relationship with providers to collaborate with them to deal with the problem. This could not be done without the involvement of National Treasury. If it were done without the involvement of Treasury, it would have been illegal. They were not there yet, so those claims were far from the truth.

Dr Sishi commented on the high turnover of CEOs, and said there was a report that the Minister had commissioned to the Council for Higher Education (CHE), which had investigated the remuneration of Vice Chancellors. Immediately after studying that report, he worried about how the principals of TVET and community education and training (CET) colleges compared to other institutions and entities. If they wanted to retain the top executives, they had to look at the working conditions of the executives. The NSFAS CEO was a fund manager with a budget of R60 billion, but a bank like Capitec, which manages around R20 billion, had far better systems and administration across the country. However, this NSFAS CEO must manage R60 billion on his own. These were the issues that one needed to look into carefully, and the private sector had a lot to teach the public sector about fund management. Any CEO appointed at NSFAS would be confronted with similar issues, so it would be critical to address them systematically.

Special Investigating Unit

Adv Mothibi responded to the NSF proclamation matter, and said the SIU had no reason to believe that the allegations received that had enabled the proclamation to be processed, had changed. There were no changes, and he still believed the proclamation should be processed based on the mandate of the SIU. The Hawks' mandate focused on criminal investigations, while the SIU considered general damages the state may have suffered. In addition, the SIU also had the mandate to investigate corruption, and considered that state resources must be used prudently. The SIU collaborates with the Hawks, and the SIU would not duplicate what the Hawks had already done.

He confirmed that he had instructed his team to investigate the allegations recently reported in the media by the former CEO.

The SIU collaborated with the Hawks to ensure no duplication of efforts. The scope of the proclamation on the NSF was based on the report presented to the Committee. The ten projects had been identified, but other projects were mentioned in the AGSA’s report that the proclamation sought to cover.

Regarding the progress of the SIU to date, the practice was that when the SIU sent its invoices to the institutions, they were accompanied by progress reports. Therefore, the NSFAS invoices would have been accompanied by progress reports. NSFAS should be aware of the status of the investigation. Occasionally, upon request by the Executive Authorities, the SIU would meet and provide updates on matters related to the investigation. Ordinarily, the invoices were sent to the Accounting Officers or the Accounting Authority, not the Executive Authority. Its legal requirement was to report to the President and Parliament. The SIU had no legal requirement to report any Executive Authority. It balanced the need for the Department to know the status of the investigation simply because they were expected to pay. However, the need to understand where the investigation stood was acknowledged, hence progress reports were submitted with the invoices.

He agreed with the Minister that state resources had to be used prudently. The letter of engagement could be shared with the Committee -- it was to ensure that the engagements happened within a specified time, the resources to be used and the rate and other matters. On finalised matters, the SIU believed it was its prerogative to report the outcomes of SIU investigations that were in the public interest.

The SIU would not oppose meeting with the Minister upon his request and have a progress update.

Regarding the assessment of allegations reported to the SIU, it was important to receive them, assess them, and process proclamations independently, as it was expected to investigate and reach outcomes independently. If allegations fell within its mandate, it would process them independently.

The Chairperson reminded everyone why they were here. They were dealing with the audit outcomes of the NSF and NSFAS, and recognised that there had been disclaimer outcomes and adverse audit outcomes for almost ten years. The Committee had said it wanted investigations. All the forensic investigations had arisen out of the Committee’s concern. This was why the SIU had brought on Board, and the Committee’s concern remained. The Committee was justified in its outlook if there were still allegations around the CEO and the delayed audit outcomes.

SCOPA's view was that adverse audit outcomes create a conducive and enabling environment for corruption, and indicate the absence of consequence management. The only way this could be remedied was through the investigations and a speedy conclusion of the audit process so that they knew what they were dealing with. Whilst Parliament may be wrapping up the sixth administration, they would make it a point to meet again and leave this matter as a high-priority issue for the seventh administration in the legacy report. Something had to give. This was not a witch-hunt or some agenda, but was based on audit outcomes. Members realised there was a problem, and it had to be fixed. There was a keen understanding from everyone that there was a problem, but now they were debating the modalities of the problem instead of fixing it. The pace was not inspiring any confidence either.

The meeting was adjourned.