NSFAS 2021/22 Annual Report; Implementation of Werksmans Report; Funding of students at university and TVET colleges; Student accommodation pilot project

Meeting report

Opening remarks
 
The Chairperson welcomed everyone present and acknowledged representatives of the National Student Financial Aid Scheme (NSFAS) and Department of Higher Education and Training (DHET) officials who joined the Committee in its oversight visits during the parliamentary recess. Priorities for the current term would be to wrap up key matters in the sector and, most of all, ensure a better start for the 2024 academic year. The Committee had tried to stabilise the sector to avoid disruption and possible loss of lives due to protests and to ensure that the mandate of the Post-school Education and Training (PSET) sector was delivered.

The Committee would also be reviewing quarterly reports that needed to be addressed and its legacy report. A draft legacy report would soon be submitted for both sectors and she hoped that Members would make meaningful contributions to it.

The Committee had previously expressed its concerns about the delay in tabling the 2021/22 NSFAS Annual Report. Members would also receive an update on student funding at institutions for the current academic year and other related matters. Some of the related matters were experienced during oversight visits. The issue of the pilot accommodation project sparked a student protest and NSFAS needed to bring the Committee into its confidence about this. She had also received a petition from students and an update on these matters should be provided to the Committee.

When NSFAS officials joined Members during oversight, it was expected that issues that came up would be addressed, because what is the point of bringing NSFAS along if these issues persisted? When these matters were escalated to the NSFAS head office, Members often received feedback from students, and nothing changed in some instances.

Members were also expecting updates on accommodation, funding status, governance and management, investigations, and the implementation of the Werkmans report into allegations of irregularities at NSFAS.

Opening remarks by DHET

Dr Nkosinathi Sishi, Director-General, DHET, remarked that section 29 of the South African Constitution stated that everyone had a right to basic education and further that through reasonable measures, the state must make provisions. The analysis of the matric results indicated that there was a better performance by many young people coming from no-fee schools. In the year under review, the rural districts averaged more than 80 percent performance, in some cases. The results were beginning to show that the inputs made since the previous year had begun to deliver the quality the Department wanted to see. Thus, the pressure was on post-school education to ensure that the doors of learning continued to be opened for all these young people emerging with results that surpassed their material living conditions. 

It was now time to show as a state how there had been progress in the accessibility of post-school education.

Dr Sishi explained the objectives of NSFAS. Since 2019, the scheme has disbursed more than R135 billion in grants. More than 1.1 million applicants were funded in the past three years. The disbursements to universities amounted to R87 billion and covered 1.8 million young people. The total disbursed for the period exceeded R122 billion for 2.9 million applicants, which was a significant number of students that had benefited. In a family of one NSFAS beneficiary, there would be more than six indirect beneficiaries. That close to three million people had benefited in the past three years indicated the significant inputs made by NSFAS.

However, administrative errors at NSFAS significantly undermined its good work. Governance issues had bedevilled the institution since 1999. The lack of a solution to governance issues and concerns about operational ineffectiveness were acknowledged. Students were impacted severely by this and urgent interventions were needed.

The Minster recently strengthened the NSFAS with two new appointments, including Professor Lourens van Staden who had studied at numerous universities, examined over 30 master and doctoral candidates locally and abroad, published over 40 peer-reviewed articles and technical reports and presented over 30 papers locally and abroad. He had worked as an administrator in many institutions and had left reports that assisted the Department in turning around the institutions of which he had been appointed as administrator.

Regarding the allegations against the former Chief Executive Officer (CEO), the board investigated the matter through work by Werkmans Attorneys. This led to the CEO's dismissal in October 2023. The Acting CEO was the substantive Chief Financial Officer (CFO) of NSFAS. The former CEO took NSFAS to the labour court and the court dismissed his application.

The Department also appointed a new Chief Operations Officer (COO) in December 2023. NSFAS was currently seized with the legalities of implementing the Werkmans report.

Further, following the release of audio recordings by the Organisation UndoingTax Abuse (OUTA), Mr Ernst Khosa, NSFAS board chairperson, took a leave of absence on 10 January. Professor Van Staden had since been appointed and assumed duty on 12 January. The board had already started meeting to address the matters concerning the options for direct payments. More than 980 000 young people had been funded in the current financial year. Youth organisations had echoed sentiments that although these numbers were good, they were not felt, because the feedback through the SMS system did not consider the fact that many of the students did not have the bandwidth and they sat not knowing they were funded. These were some operational issues that Professor Van Staden and his team were preoccupied with. He assured Members that the Department was determined to turn things around.

NSFAS audit opinion: AGSA briefing  

The Auditor-General of South Africa (AGSA) told the Committee that there were significant delays in compiling the 2021/22 financial statements. NSFAS received an adverse audit opinion due to material misstatements and limitations. 

The overarching root cause is that the organisational capacity and systems are inadequate to manage and maintain the growth that NSFAS has experienced since 2018. NSFAS has grown in size and complexity between 2017 and 2022. There has been an increase in the number of students, amount of revenue, number of unique transactions, types of eligibility requirements to enforce, and the level of complexity in the year-end reconciliation process. Despite the numerous internal control deficiencies raised during these years, the NSFAS functions and responsibilities kept evolving and expanding haphazardly, without weaknesses in systems, controls, and human resources being properly addressed and attempts to stabilise the entity were insufficient. In summary, NSFAS was not ready to provide substantial social benefits for so many students, in such a short period of time, taking into account where it was starting from.

(See the attached presentation for details)

Discussion

The Chairperson noted the presentation of the Auditor-General (AG) and the comments about the adequacy of the action plans. There was a time when the Committee Members were pleased that NSFAS reported better audit outcomes. Finding themselves with an adverse opinion was extremely concerning, especially after the Committee had invested time to reinforce the action plan presented to it and Members had asked NSFAS to amend it to be more impactful.

The lack of appropriate monitoring of the action plans by the governance structure, particularly the board, was extremely concerning. The board was there to ensure that all recommendations coming from Parliament and the AGSA were implemented.

She sought clarity on the tuition statements regarding what the institutions were billing the students versus what the NSFAS was paying. Was the AG struggling to obtain this information from the institution?

She also sought clarity on the errors in the data given to NSFAS by the institutions. Was it possible that the data on study material-related costs changed due to charges on student accounts for things like clubs and societies? NSFAS did not normally pay these fees. However, students complained about that being unfair as it excluded them from participating fully in student life. She asked NSFAS to clarify this.

The Committee was concerned about the late submission of this report and Members had considered raising the matter with the Speaker.

Further, there was a concern that NSFAS did not have sufficient budget for administration to deliver what it intended to do. It needs to be noted that NSFAS experienced growing pain due to the influx of students coming from basic education who needed funding. NSFAS needed the capacity to administer its budget for students but by the same token, it had to ensure that there was no maladministration of the few available resources.

She asked the AGSA to clarify what could have been done to avoid a regression on the NSFAS audit outcome.

Dr W Boshoff (FF+) said there had been a recurring theme about the inadequate systems at NSFAS for the past five years. Members had also heard much about the transition from a loan to a bursary scheme, but it had been five years, and the challenges persisted. He acknowledged the evident progress, but NSFAS was regressing again.

Ms K Khakhau (DA) disagreed with the AGSA on the inadequate funds for administration at NSFAS. There would be a shortfall if a budget was available but ended in fruitless expenditure. NSFAS was spending a million rand monthly for office spaces it did not need. That was money that could be redirected to administrative functions. Even if the money was available, the skills, morale and competence capacity would be lacking, and there would still be problems at NSFAS.

The audit outcome was delayed and even before these findings, the Committee had given NSFAS advice on how to get its house in order. NSFAS had shown great incapacity to turn things around. The argument that there was insufficient money within NSFAS to fund administrative functions was incorrect. It was due to incompetence at NSFAS.

Mr T Letsie (ANC) said the AGSA’s report on NSFAS was 15 months behind schedule. NSFAS should be reporting on the 2022/23 financial year. The AGSA’s report was welcomed with a heavy heart as NSFAS had so many material misstatements in its financial statements.

Further, NSFAS paid R2 million monthly for its office, not R1 million. The administrative fund was not being utilised optimally and properly. The AGSA said the NSFAS hired people to come to do their job, but they could not monitor the work that the consultants were doing. Thus, one asked, what is at play here? Was it a capacity problem or were people being taken for a ride? Was there a plan to weaken the institution so that the focus shifted to capacity instead of the actual challenges the scheme faced?

If one studies the NSFAS annual report, NSFAS is given R45 billion for the financial year and claims to have used R38.7 billion, but it does not make sense if one looks at how the money was spent. NSFAS received funding based on an annual performance plan (APP) presented to Parliament, but when it was supposed to report on the things the money was spent on, it was not there. NSFAS could not prove what it claimed to have achieved. He suggested that NSFAS take the report, fix it, and bring back a sensible report to Parliament, even though it was already audited and would not change anything. The report must be fixed so that NSFAS could account properly for what they spent money on, and this needed to be reported in detail.

Mr B Yabo (ANC) asked about the standard used by the AGSA concerning Schedule 3A entities like NSFAS that produced a social good. He recalled the Road Accident Fund’s case on this and asked if the AGSA had considered the appropriate standards used by these entities.

Secondly, internal controls at NSFAS were concerning, and the structure of the entity made it difficult to operate optimally. NSFAS must stop operating like a bank because it was not. The minimisation of a call centre supported this sentiment. The submission of certain information required by the AGSA was delayed because the internal loops did not allow for real-time reports to be submitted to the AGSA. This needed to be investigated with serious intent by NSFAS. This was also not assisting Parliament.

Mr M Shikwambana (EFF) said he was not surprised by the damning report presented by the AGSA and the delays in the release of the financial statements of NSFAS. The AGSA reported that there were operational and administrative crises in NSFAS. People responsible for handling the entity's finances for the people of South Africa could not account for it and rather made misstatements on their financial reports. He proposed that if these challenges were not corrected, and if the Committee did not zoom deeper into NSFAS, the entity was going to collapse.

The AGSA report revealed the seriousness of the crisis at NSFAS. The entity was entrusted with monies for South African students, but it was grossly mismanaged. The board was not doing South Africans justice and protecting the money they were given to support South Africans. Perhaps these people should be removed and the NSFAS dissolved so that there could be people who could get things done. There were thugs here, people who were ready to steal the money but could not account for it and provide evidence for how the money was utilised. Individuals at NSFAS were looking out for themselves. The board and management must be replaced with competent people.

Ms D Sibiya (ANC) noted that slide 11 reflected how bad things were at NSFAS.

Ms C King (DA) said she was concerned about the material irregularities and asked what the AGSA had done over the five years, that NSFAS could not fix their management information (MI) systems, and what action steps had been taken to ensure this was dealt with. This issue would come up again in future reports.

There were a lot of inconsistencies in the data supplied by institutions to NSFAS involving how the reporting was done and the improper processes in following Generally Accepted Accounting Principles (GAAP). Had the AGSA considered providing some training or guidelines to the NSFAS audit team to ensure that proper reporting was done?

The delays with this report were attributed to the close-out project, but the AGSA noted glaring issues with the reconciliation and accounting system. Had the AGSA provided guidelines on what it wanted to see when auditing? There was an ongoing Special Investigating Unit (SIU) investigation about monies owed to and by NSFAS, so a lot more would be uncovered from that.

Was any evaluation done on the supply chain management (SCM) processes? There were irregularities identified by the AGSA stemming back to 2021/22, which only came up now. Was there any progress on changing the legislation on the NSFAS mandate to transition from a loan to a bursary scheme?

There were glaring inconsistencies in how the annual report was compiled. She had revisited the 2020 annual performance plan (APP) that was handed to Parliament and that APP had been cut and pasted to this report. The only new issues were the AG’s remarks and overview of NSFAS performance in terms of the targets and indicators, but even in this, there were inconsistencies. On page 45, it was indicated that the actual achievement for 2021/22 was an unqualified audit opinion with findings, but the AGSA said it was adverse. This raised suspicion about the report handed to Members. Some calculations were wrong. It raised concerns about the capabilities of the entity and raised questions about other reporting inconsistencies and what would be stemming from the 2022/23 report. She agreed that this report needed to be reconsidered and resubmitted. It was no use to discuss it when the Budgetary Review and Recommendations Reports (BRRR) process had come and gone. It was way outdated, and many more things had transitioned within the space. Members were seeing more irregularities that had taken place and irregular expenditures resulting from the direct payment contracts.

She was not pleased with the report but welcomed the efforts of the AGSA. This was taxpayers’ money that was not properly accounted for. She was lukewarm about dissolving the board as some positive changes had been evident, but there was a need to consider NSFAS’s ability to properly account.

Ms J Mananiso (ANC) said that Mr Shikwambana must visit the rules of the National Assembly on parliamentary language, because there was conduct Members needed to adhere to when engaging in Parliament. It would be wrong to call people thugs.

Mr Shikwambana said that Ms Mananiso was misquoting him, as he indicated it was due to a lack of a better word.

Ms Mananiso said that was unparliamentary language.

The Chairperson said that Mr Shikwambana did not have the right to call someone a thug. He must have evidence and substantiate why he was calling them a thug. Parliament could not work on hearsay. 

Ms Mananiso said that it was important that Members of Parliament conduct their business within the boundaries of engagement in Parliament and as per the rules.

She acknowledged the AGSA's work on unlawful activities at NSFAS. She agreed with the sentiment to not accept the 2021/22 Annual Report and urged NSFAS to take it back for review and make the necessary adjustments that would report accurately on the administration and management of funds given to NSFAS in that financial year.

Unfortunately, throughout the past five years, there have been repetitive issues of poor record management, poor financial management, and incapacitated ICT systems. These matters were still cropping up. The AGSA’s report was a horror, and if Members did not save NSFAS before the term ended, they would have failed South Africans.

She acknowledged the progress on some of the matters that the AGSA recommended for implementation, although so much more remained to be done. Noting the recommendations from the AGSA, when NSFAS sent a ‘proper’ report, they must include the plans and timelines.

The AGSA indicated that it was willing to deploy some of its auditors to assist or capacitate the NSFAS audit team, and she asked if this had been done yet. The ICT systems at NSFAS needed urgent intervention and were a recurring matter every year.

Members rejected the 2021/22 NSFAS report as it stood and instructed the scheme to refine and account for the matters. The Chairperson added that NSFAS needed to provide specific details. 

Responses

Ms Sangeeta Kallen, Business Unit Leader, AGSA, highlighted that in terms of the audit of performance against predetermined objectives, the AGSA had raised material findings on the usefulness and reliability of the performance information. The AGSA worked around programme two and could not obtain sufficient appropriate audit evidence to support that information. She asked the Committee secretariat to involve the AGSA in understanding the amendments required so that the AG could provide input into the process that needed to be followed. This would include the details about what had been changed, the process followed to make the change and what informed the change. This would enable the AGSA to evaluate the process that it ought to follow on its side.

The audit report had been issued and the audit was closed, but the AGSA needed to understand the details behind the changes.

On the standards used by the AGSA, she could not comment on the Road Accident Fund matter and how it impacted NSFAS. It was not within the AGSA’s mandate to select standards. It was National Treasury’s responsibility to identify the accounting framework and the AGSA audited against that framework and the application of the standards within that framework.

The AG did interact with the internal audit team to determine the work they conducted within the environment. The AGSA did its audits in terms of international standards of auditing and the audit methodologies were risk based. They identified the risk within the environment and tested according to the risks. So, the AGSA worked with internal audit on this basis.

On the 2022 sets of financials and the report issued, the AGSA ensured that it interacted with management and, the board and internal audit to be clear about what the AGSA believed the root causes of the findings were. These root causes were what NSFAS would have prepared an audit action plan on. The AGSA could give management recommendations on how they ought to remedy the root causes. These were identified as shortage of skills, incapacity of the systems and insufficient response to the deficiencies identified.

NSFAS would then prepare an audit action plan to remedy those root causes. The root causes had been unpacked on a multitude of platforms and the AGSA hosted workshops with management and the governance structures about them. 

The AGSA did not provide training or capacitation of internal audit functions because this would threaten the independence and objectivity of the AGSA. However, it could conduct reviews in terms of action plans. The AGSA also audited some of the remediation steps taken by NSFAS.

Ms Ignatius Fourie, Senior Manager, AGSA, confirmed that the AGSA requested student account statements from the institutions. It had challenges in obtaining those statements. There were differences between the student account statements and the study costs reported to NSFAS. There was no universal way of reporting the cost of study to NSFAS – some institutions just provided totals while others broke down the costs per study item. The AGSA found that in some cases, they might include charges or levies, like gym fees, that might not be part of what NSFAS needed to fund.

There should be clarity on how these figures were presented, and they must be presented in a manner that is easier to reconcile.

The audit included procurement and contract management as a focus area, which was reported in the management report. Any material non-compliance on any of the SCM prescripts would be reported in the audit report. If any irregular expenditure was identified, it was disclosed in the financial statements. From this perspective, concern was raised about all the current allegations. Most of them were involved expenditure incurred within the years the AGSA had not yet audited and for which it did not have the financial statements. However, the audit did include a valuation of the SCM processes.

Regarding the close-out project, there was no standard operating procedure for the reconciliation. NSFAS was not clear in terms of how it would work, what it would include and controls around it. There had been improvements but there were also some areas of weakness such as a clear definition of the cost of study provided by an institution.

The NSFAS legislation had not been updated to account for all the changes that had since been made at NSFAS, but this was something that NSFAS could attempt to resolve.

Mt Thomas Mamogwe, Deputy Business Unit Leader, AGSA, referred to three material irregularities raised in the 2019/20 financial year. The AGSA had outlined the MI process to be followed and might refer the process for further investigation or recommend binding remedial actions.

National Student Financial Aid Scheme

Chairperson’s remarks
 
Professor Lourens van Staden, Acting Board Chairperson, NSFAS, said that the NSFAS board received concurrence from the Minister on the 2024 bursary funding guidelines, which had been published to all stakeholders. These guidelines had notable changes, including instances where the bursary allocations had been increased.

Secondly, by 8 February, NSFAS had received a record of 1.873 million applications and as a result, the board approved an extension of the deadline for the bursary scheme until  15 February.

Thirdly, the board approved the guidelines for implementing the loan scheme. This followed the announcement by the Minister on the first phase of the comprehensive student funding approved by Cabinet. The board approved the loan scheme funding guidelines and finalised the policy framework and a project plan.

Fourthly, now that NSFAS had to administer the loan scheme, the board was in the process of expediting its implementation by inviting banks to assist NSFAS in disbursing loan scheme allowances and the bursary scheme allowances for this year. The board also approved the selection of financial institutions, which would have to comply with requirements regarding resources, expertise, and skills, among others.

Regarding the Werkmans report, the board resolved to extend the scope to further implement the termination of the contracts of the four direct payment service providers and institute disciplinary procedures against NSFAS employees implicated in the report.

The board approved the terms of reference for the investigation to address the OUTA allegations against the chairperson, Mr Khosa. A reputable firm of attorneys was appointed to conduct the investigation, and the outcomes would be presented to the board once they were finalised.

The terms of reference for the attorneys were:

-To familiarise themselves with the OUTA report, NSFAS Act, board charter and other relevant documents;
-To provide the board with information on the veracity of the allegations in the OUTA report that related to the chairperson and the board; and

-The potential impact of the work of NSFAS in reviewing the contracts with the direct payment providers and any other matter that might arise out of the consideration of the report and interacting with the affected parties.

The legal advice must be provided within 30 days. The legal service provider would be required to produce a written report for the board.

The board had contextualised a turnaround strategy and it was dealing with management issues. NSFAS had capacity issues due to many vacancies in executive management where some of the executives were dealing with more than one portfolio. They appointed three turnaround specialists who would be responsible for assisting the executives in implementing the turnaround strategy and the organisational changes.

The structure of the NSFAS board did not cater for the real mandate of NSFAS. The current structure was inadequate, and all vacancies needed to be filled urgently.

Regarding student accommodation, there were a total of 23 TVET colleges and 17 universities on board for the 2024 pilot project. There were ongoing engagements with Universities South Africa (USAF) and TVET college leadership to improve the delivery for the current year.

Annual Report 2021/22

NSFAS informed the Committee that significant delays were experienced in concluding the compilation of the annual financial statements for 2021/22.
 
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 implementing of the student-centred model and the 2017 Presidential Pronouncement, NSFAS’s 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.

NSFAS was addressing 54 communication of audit findings (COMAFs).

(See the presentation for details)

Discussion

Ms King said that since the previous night, she had been dealing with the issue of Cape Peninsula University of Technology (CPUT) students who had no place to sleep and were sleeping outside. This had something to do with the cap funding. That morning, communication was sent out by CPUT that they had come to an understanding with NSFAS that they would take CPUT off the pilot project; but which criteria were used to put people on or off the pilot project?

It had been heard from various institutions that there were no clear guidelines and proper communication and consultation regarding the pilot project. It was sprung upon them that they had to do it. Nelson Mandela University was caught off guard because it had already signed contracts with private service providers to provide accommodation. How could they get out of these contracts they had already signed? What are the challenges experienced in the pilot project and did NSFAS have the capacity to carry this project through?

It was worrisome that there were still students who might not be placed into properly accredited accommodation at this stage. They had heard that students were placed in inferior accommodation facilities at Buffalo City College and the University of Fort Hare. That morning CPUT said it received over 72 000 applications and it could only offer 15 000. Was it worthwhile going ahead with the pilot project, because it would leave a lot of students stranded? The cap was also a concern in metro municipalities as it was said to be insufficient.

On what basis did the board decide to extend the contract for direct payment service providers? It had been over five months since the Werksmans Report was handed over to the board and it indicated that there were discrepancies in these contracts. In most cases, these service providers could not disburse allowances timeously or correctly and at times not at all. Did the board consider that these service providers could lead to more instances of irregular expenditure during the audit?

In the last meeting with NSFAS, it indicated that it had a R1.1 billion shortfall which would affect 87 712 students. Now, they heard that the application process was extended to the next day with a million applications received and only 900,000 processed so far. The previous year, the application process was extended only to find out that more than a million students were rejected or had withdrawn their applications. Further, when the budget was cut, NSFAS ran short and could not cover some of the 2023 allowances, which were still unpaid. What were the discussions on the shortfall of funding and how it would it be covered considering the increased tuition fees and other related costs? Members needed details of how the money would be sourced or reprioritised.

When was  NSFAS going to learn that when you set up eligibility criteria, it must be accompanied by an application process? Students applying now would be subjected to eligibility criteria after the system had granted provisional funding. At what stage was NSFAS going to assess these complexities?

She asked on which basis NSFAS decided to no longer adhere to the 2019 MOU with the SA Revenue Service (SARS) and why NSFAS decided not to do the consent forms. What process was going to be followed to ensure that some of these students would have an option to reapply?

The improper implementation of the Werksmans Report left a bitter taste and gargantuan concern about the 2024 academic year because of the pilot project, the direct payment system, the lack of funding for NSFAS to properly pay and the loan system where Members were still in the dark on the agreements between the NSFAS and the students regarding the repayments, interest charged, etc. However, she welcomed the available funds for the missing middle students, although it opened up another web of challenges. How far was the scheme with this process?

Mr Shikwambana said the OUTA report contained allegations of mismanagement of funds directed towards the chairperson of the board, Mr Khosa, who had since taken a leave of absence. It would assist greatly if the Minister also took a leave of absence to allow the smooth process of the ongoing investigations.

The NSFAS board had resolved to appoint an investigating team that would investigate allegations against its chairperson. He did not believe that it was advisable for NSFAS to appoint the investigating team and recommended that every board member step aside and allow an independent institution to investigate these allegations. Why not consider appointing a retired judge to investigate these allegations against the chairperson of NSFAS and the Minister? There would not be a desirable outcome if NSFAS itself procured the services of an investigator.

He questioned the process in appointing the Werkmans attorneys. He did not believe that the CEO was the only one responsible. These investigators were appointed by certain individuals within the entity so that they could be protected.

The Werksmans recommendation on the direct payment contracts with the fintech companies was that they must be terminated. He wanted to know how far the entity was in implementing this recommendation, among others. These companies' contracts must be terminated with immediate effect.

There were 252 incorrectly defunded students at the University of North West who were unable to register. They were returning students, and they were not allowed to register with the university because of the defunding. He wanted to know if NSFAS was aware of students who were incorrectly defunded and could not register at institutions now.

Regarding the late payment of tuition fees, it was well known that there were a lot of students at institutions today whose fees from the previous year had not been paid. These students were unable to register for the 2024 academic year and the institutions were not budging. Members would find these students across all institutions. When they were not registered, they were also unable to get accommodation and some of them came from different provinces.

He welcomed the 15 February extension date for applications, but NSFAS had indicated earlier that it had received 22 954 loan applications while 12 890 were waiting for valuations, 848 withdrew and 30 were still being processed. What was NSFAS doing to assist the 8 345 applicants who had only created profiles and not submitted their applications yet? These students might not be aware that they still had outstanding documentation for their applications to be completed. Did NSFAS know if they were aware of the missing information?

Regarding all the applications processed so far, when was the NSFAS going to upload them properly and inform the institutions of the funded students? Currently, students are not allowed to register because NSFAS has not yet confirmed funding for these students to institutions.

Members were aware that NSFAS once mentioned R42 billion-plus that the entity had taken from its reserves to give to institutions to deal with the registration processes of the students that were going to be funded in this academic year. Students were unable to register because they had not received their application status for funding.

Mr Letsie said on 11 January, he read a letter that the NSFAS board released saying that the substantive chairperson of the board had taken a leave of absence for one month. In one month, the board would appoint a legal firm to investigate the allegations that OUTA made on 4 January. How far was the board with this process and when was the legal firm appointed? When would the 30 period end and in the process, what would happen to the substantive chairperson?

Secondly, the Werkmans report detailed several issues, including the irregular appointment of the four service providers and the role of the former CEO and some of NSFAS's employees. So far, the board has not mentioned to Parliament that it had let the CEO go. It was a big deal for Parliament not to be informed.

Thirdly, on slide 13, NSFAS spoke about a process of filing court papers to set aside the appointment of the four service providers as advised by the Werksmans report. Now, on 8 February, Members saw a circular detailing that in the meeting on 31 January 2024, the board would have written to institutions informing them that these four service providers would continue to disburse these funds until further notice. He felt that this reflected a lack of urgency in dealing with this matter and asked what the board discussions were on these service providers and what the timelines were to implement the Werkmans recommendation to terminate their contracts.

The Werksmans report recommended that other employees who were implicated be disciplined. Had this process commenced and who was responsible for it? If it had commenced, how far was the process and who were the implicated employees?

The acting chairperson also mentioned consideration being given to inviting banks to disburse these funds, but if that was done, how would that process be undertaken and would National Treasury regulate it? How long would it take to advertise that contract openly?

Bursary applications were a mess. They were not dealing with numbers here but people who were the poorest of the poor and needed the funding. According to NSFAS, 369 320 were awaiting evaluation in February. Some institutions had already commenced classes and some students were in limbo. Out of the 369 320 students, 198 000 were non-SASSA applicants, meaning the rest were SASSA beneficiaries still awaiting evaluation. This did not make sense, especially for SASSA beneficiaries. Some of these students had already lost their space in the institutions.

Furthermore, 161 492 applications were in progress but what did this mean? When were these students going to receive confirmation of funding or not? Additionally, 1 213 were on appeal but when were these appeals going to be finalised?

Regarding the pilot project, 23 TVET colleges and 17 universities with 8 250 beds were to be accredited in TVET colleges, but what was the hold up on this as well as at universities?

He accused NSFAS of not trying in its presentations. A simple arithmetic of one plus one equals two seemed difficult for NSFAS. It claimed in its presentation that it would accredit 77 331 beds for universities; 49 411 were accredited and 27 926 were still to be accredited, but when you added these two numbers, it did not make 77 331. He questioned the legitimacy of the numbers contained in the presentation. He wanted to know the reasons for the delays in accrediting the 27 926.

Lastly, when there was consensus on NSFAS playing a part in the accreditation of student accommodation, Members cautioned against it and said that there were a high number of small businesses that provided accommodation and were complaining that to be accredited by universities, they had to pay huge amounts of money which they did not have. He asked NSFAS to bring these small businesses back.

He recalled that at Buffalo City TVET College during an oversight visit, many students complained that someone who was not employed by the institution or on the students’ representative council (SRC) had been allocating students kit beds. Students thought it was a joke until they got these kits from the landlords. How did this happen? That individual was found to be a former SRC leader, and these former SRC leaders were often pushed to the front to do this dirty work so that the people responsible were not exposed. This was not an isolated case. The issues raised at CPUT were like those raised by Buffalo City TVET students. Furthermore, many in other institutions had raised these issues with Members, and he felt that it was too much of a coincidence.

The Committee might need to instruct the Department to commission a forensic investigation into the accreditation of student accommodation to zoom into these shenanigans. If NSFAS took too long to address this issue, Members would start opening criminal cases against individuals who were implicated in corruption in this space. This could not be turned into a money-making scheme.

He warned the people who were responsible for this because it was de-campaigning the efforts of the ANC government. These people would be isolated and exposed.

Mr Boshoff acknowledged Prof Van Staden's presence but felt that seeing him was not pleasant because wherever he went, that was where the problems were. 

He had said a reputable law firm was appointed to conduct the investigation, but he wanted to know what law firm it was. One would expect some reflection on what happened and transpired in the media relating to NSFAS. He was hoping that NSFAS would give Members some confidence in its work relating to the allegations of corruption at the entity.

What happened to the system that NSFAS used before the appointment of these four service providers? Either NSFAS took up this task or the institutions did. He was concerned about returning students at the University of North West because they did not receive any communication about their funding status and thus could not register. These students ended up borrowing money from family members to register for their studies.

There were also late payments in the previous year. What was the status update on those payments and could Members expect payments to be made on time in the current year? NSFAS and Eskom were campaigning for the opposition.

Mr Yabo said the chairperson of the board took leave of absence on 11 January. It was said to be 30 days long but what was his status? Was he returning to his position?

NSFAS was a Schedule 3A entity with a lot of interest from students and parents. It got an enormous amount of attention, so when it communicated with its stakeholders, it must do so clearly, directly, and openly.

NSFAS spent R37 043 billion against a budget of R44 926 billion, which left about R7 882 billion unspent. What were the reasons for this? In the instance where NSFAS would disburse money to institutions during the close-out project period, how did NSFAS hold to account the entities that institutions used to disburse funds?

NSFAS human resources needed to be capacitated. As an ICT-prone entity, how effective were NSFAS cybersecurity measures? What was the plan to ensure better security for its ICT infrastructure and systems? Was the budget even sufficient to cover these security measures?

Ms King sought clarity on the cost of bed accreditation which was between R100 to R200 per bed and asked how much NSFAS had made from this concept. A five percent payment was also required as an administration fee on what was received from NSFAS. Did NSFAS receive funds from this?

Ms Mananiso said she was concerned that NSFAS inconsistently applied the Werksmans report recommendations. It seemed there was a witch hunt. The entity needed to do due diligence in implementing the recommendations of the report. She asked to be provided with some highlights on the progress.

She asked if NSFAS had a monitoring tool for accommodation accreditation, because Members observed in the Eastern Cape that some accommodation spaces were unsuitable for students.

She was concerned about the delays in evaluating the applications and asked what NSFAS was doing to address this. The CEO had mentioned that staff were deployed for onboarding at institutions. Which institutions? 

The Minster should appear before the Committee and take Members into confidence about all the allegations recently surfaced at NSFAS. She encouraged anyone with evidence to open criminal cases against the perpetrators.

The Chairperson lamented the poor planning and emphasised the importance of strengthening coordination in the sector. Listening to the AG’s presentation, the concerns of students reflected how weak the coordination between institutions and NSFAS was. This was also supported by the relationship between NSFAS and SARS. NSFAS could not operate haphazardly; it was a Schedule 3A entity.

The planning was poor to the extent that young people believed free education was a fallacy because of NSFAS’s inability to administer the limited resources available. NSFAS-accredited residences that were not up to standards for students, among other things. Residences were not accredited on time. The President of Fort Hare University showed Members pictures of residences accredited by NSFAS and they were so bad, way below the institutions’ residence standard.

At times, there was a rush because of demand, but what was scary were the allegations that the rush was because of corruption, and that there was a mess to enable corruption. She questioned the intention behind rushing things because they were useless without the right systems in place to ensure that these ideas were successful. There was a need to fix the planning and coordinate better. The issues of governance were extremely concerning. They could not afford to have NSFAS back in administration. The tide was being turned and there was no option to go back. They were hoping that the turnaround specialists could assist. 

She accused NSFAS of a lack of proper planning and asked if its business plan included travel allowances for students placed in accommodations far from the institution. Did the student allowance include the travel fares? These issues were extremely aggravating for students.

Lastly, she wanted to know how many students could be covered through the loan scheme and if NSFAS could administer these loans to deserving students. She also expressed frustration about how the relationship between NSFAS and SARS collapsed.

Responses

Mr Masile Ramorwesi, Acting CEO, NSFAS, responded to the question about outstanding 2023 fees. NSFAS had previously reported to the Committee that the wrongfully defunded students had been reinstated. He recalled a case at the University of North West where the NSFAS team dealt with an issue of students whose applications were rejected due to incorrect 2023 academic results uploaded by the institution. The institution has since uploaded the correct results and NSFAS is currently processing the applications of the affected students.

Regarding allowances, there were outstanding allowances from 2023 that had previously been reported but on 28 January, NSFAS paid institutions R2 billion including R580 million for TVET colleges, to cater for the outstanding fees and allowances of 2023.

In the student accommodation pilot project, the criteria for service providers were recommended by management to the board and approved. The pilot project focused on a study of good and bad institutions in different geographical areas and selecting which institutions were suitable for the pilot project. For  CPUT, 881 beds were registered and accredited in the NSFAS system. He reminded Members that the pilot was a study, not a takeover of accommodation from institutions. The institutions were informed that as part of the principles that NSFAS would follow, their institutional residences must be filled first and then followed by the NSFAS-accredited service providers.

The cap had been communicated in the guidelines for 2024. For universities in the metros, it was set at R50 000, and for others, it was R41 000. The institutions had been notified and must comply with the cap.

NSFAS had capacity challenges in the pilot study. The student accommodation unit and the human resources process had to be capacitated to ensure that the right people were recruited. Further, there were challenges with accrediting agents relating to payments from the first phase of the pilot done in 2023 and allegations of corruption and bribery that were reported in the media. There were also instances where some accommodation providers (APs) were blacklisted by institutions and the accrediting agents had to assess the reasons why they were blacklisted.

Other challenges were systemic. They concerned the ability to confirm on-time funding statuses; confirmation of registrations; an influx of accommodation providers registering on the pilot and requiring immediate inspection and grading; and catching up on the backlog on the registered and accredited APs in the system. There were also challenges in bringing institution residences on board due to the delays in the notification of NSFAS-funded students and late provision of staff to institutions for the onboarding process.

Training was a critical part of the process. NSFAS staff members were deployed to institutions to focus on training so that the institutions knew how to onboard the students on their own.

The R1.1 billion shortfall affecting 87 000 students in the 2023 academic year was indeed realised. The TVET colleges experienced a further shortfall after budget cuts were announced. NSFAS submitted a budget adjustment to the DHET proposing to use its reserves to fund the shortfalls. Before this meeting, National Treasury confirmed a R7 billion rollover from the 2021/22 financial year and these funds assisted with these shortfalls.

The 2029 consent form, as agreed in the MOU, was disrupted during the Covid-19 period due to physical restrictions that limited the exchange and completion of physical documents. NSFAS took all the contents of the Consent form and incorporated it into the application form so that students could consent. SARS, in December, told NSFAS to revert to the physical and manual consent form agreed on in 2029; hence, the process commenced to comply with the requirement.

On the upfront payments, this was confirmed by the Minister from the budget of R4.2 billion as communicated. On 31 January, NSFAS made R3.4 billion upfront payments to both TVET colleges and universities. This payment process was sitting at 80 percent completion and as more information came in, the balance would be paid in the allocated funds.

Regarding the students awaiting evaluation status, this occurred when a document was missing. When some information was missing, the system was set up to remind applicants via SMS to complete the application process. This evaluation process also included waiting for an assessment of financial eligibility after receiving information from SARS that confirmed the family income of the applicant.

As for fraud allegations relating to accreditation of student accommodation, where NSFAS was made aware of such instances, it encouraged people to submit evidence to follow up on the allegations. 

As for the R7.8 billion not spent in the 2021/22 financial year, NSFAS had significant savings in that year coming from the TVET colleges and universities. There was a low uptake when compared to the projections made for that financial year.

Additional caseworkers were appointed to assist with fast-tracking the applications and appeals process for the 2024 academic year.

Ms Sibongile Mncwabe, Chief Corporate Services Officer, NSFAS, responded on matters related to student accommodation and provided some context on the issues at CPUT. She said that NSFAS met with the institution in December. Out of the engagements with individual institutions, NSFAS felt that collaboration with the pilot project would provide a smooth start to the academic year. However, CPUT requested to be exempted from the project as they had put measures in place to ensure that the start of the academic year was smooth for them. NSFAS agreed, although the team wanted to understand more, because the pilot was based on the needs of an institution and NSFAS's capacity to assist the institution.

CPUT was managing two channels. NSFAS gave a green light for channel one but would take an interest in channel two because that was where NSFAS-funded students were concentrated. During engagements with the landlords, NSFAS discovered that capping and compliance with the minimum norms and standards were not upheld. There were back-and-forth engagements which resulted in 881 beds. The number of beds NSFAS had per institution were communicated and these numbers were broken down to campuses. This gave the institutions a clear picture of the current numbers and once they were filled, then the institutionally accredited processes would kick in.

The point about inferior properties was noted, but there were dual accreditation processes by NSFAS and institutions. NSFAS would appreciate details of the inferior properties. In its own inspection and accreditation process, NSFAS had grades A to E, but all of them complied with the minimum norms and standards of student housing.

The intention was to clean out all outstanding properties awaiting accreditation by the end of February; however, NSFAS had seen an influx of landlords applying on the portal so the target of beds became a moving one. NSFAS also made it clear to institutions and APs that it would be aligning the boarding of students in these properties with the academic cycle to avoid interruptions.

She apologised for the discrepancy in the numbers reported. This was a result of the moving number of available beds.

NSFAS did have a monitoring tool for the project and reports were coming through. The systems were helping to improve the project.

The Buffalo City College matter had been concluded. The biggest issue was that the allocation and placement of the students were against the offer letters received from the landlords. These were coming in slowly but since the previous day, they had managed to onboard and allocate all the 900 students the institution provided. Students were also informed about where they would be residing. 

When NSFAS analysed accommodation, it had information on the distance from campus to further analyse the need for transport and engage the landlord about possible transport provision for the students.

The Chief Operating Officer had announced that the loan scheme would be available to 31 800 students. To apply for the loan, one must go through the NSFAS application process and meet the eligibility criteria. However, NSFAS was currently assessing bursary applications and redirecting eligible applicants towards the loan application process - those with an annual income of R350 000 to R600 000. The scheme was open to both postgraduate and undergraduate students who were enrolled in a public university or TVET college. Science, technology, engineering and mathematics (STEM) programmes would receive 70 percent of the funding, while humanities would receive 30 percent. To be eligible for the loan, the applicant must sign a surety for the loan amount, and the awarding would be based on satisfying the eligibility criteria.

Mr Thulani Melula, Acting Chief Information Officer, NSFAS, said that the NSFAS had established a cybersecurity unit for defence against any potential risks. This unit was committed to safeguarding sensitive data, mitigating security incidents, and fostering a culture of security awareness in the organisation. Part of the services of the unit would include cloud security, data security, incident management and event monitoring management.

Ms King said her concern with the NSFAS loan scheme was that Members were not given assurance regarding the repayments and the interest rate.

The Chairperson said that the Committee was due to receive a full briefing on the comprehensive student funding report and the loan scheme emanating from the work of that task team. When the Department came to report on the model, it would assist if NSFAS was present. 

Professor Van Staden said that he could not respond to questions about the delay in implementing the Werksmans report, but when he assumed office, the board commenced with implementation. The top priority was terminating the direct payment service provider contracts and instituting disciplinary processes for implicated NSFAS officials.

The Special Investigating Unit was also investigating and looking into the termination of the four contracts. The SIU had a different methodology of work and could terminate irregular contracts in a shorter time frame.

The reason why these fintech companies were still processing payments on behalf of NSFAS was that the contracts must be terminated legally. NSFAS was currently fast-tracking the possibility of terminating these contracts through Werksmans Attorneys. He assured Members that disciplinary hearings would take place for NSFAS workers implicated in the report.

As for the loan scheme, the application period was opened from 2 February until 15 February. Students who previously applied for the bursary scheme but did not meet the financial criteria did not need to submit new applications for the loan scheme. An amount of R3.8 billion was allocated to assist with the loans to around 30 000 students.

The board had approved a deviation request to expedite the implementation of the loan scheme by inviting banks to bid in a close-ended process for the disbursement of the loan scheme allowances as well as the bursary scheme allowances. Once this process was completed, the responsibility for disbursements would not rest on NSFAS management.

The CVs for the turnaround specialists within the NSFAS board were available for the Committee to scrutinise. The two individuals had substantial experience and proven track records. One was a chartered accountant and a qualified and registered turnaround specialist. The other one had expertise in human resources, project management and ICT.

NSFAS was engaging service providers and there were currently thousands of beds available, but the challenges were the funding cuts and the pricing for accommodation in metros. The cost of running a private residence could be as high as R65,000 per annum, way above the R50,000 cap.

The Chairperson said the Committee was recently at Rhodes University, where accommodation went up to R70,000 inclusive of food and so forth. The Committee had tasked the universities to bring forth their research on student accommodation because consensus needed to be reached on the cap. She welcomed the involvement of the Competition Commission in this matter.

Furthermore, during oversight visits to institution residences, Members were joined by officials from NSFAS who saw the state of some of the NSFAS accredited accommodation. Those officials must inform management at headquarters about the state of residences accredited by NSFAS so that these matters could be resolved. The Committee could not entertain hearsay and endure a continued state of chaos in the sector when there were people at NSFAS who saw these residences during oversight.

Further, the issues at Buffalo City College were not resolved.

DHET remarks 

Dr Sishi said that with all that had been said about NSFAS, what remained was the Department's plan to fix the student support system in South Africa. That plan was the comprehensive student funding model, which was extensively consulted upon. That plan would test the theory of what needs to be done now and in the future. It was a 10-year plan and the loan scheme introduced in the current year was the first phase of implementing the comprehensive student funding model. The plan would cover vast issues within the PSET sector.

He had also picked up firm proposals about what needed to be done to deal with corruption and reported incidents of non-compliance. Where issues of non-compliance were identified, he was encouraged by the fact that investigations had been conducted.

The Werksmans firm was well established, but they did not work alone in the investigation. They also worked with Advocate Ngcukaitobi and were now responsible for ensuring their report was implemented. This would assist in the preservation of limited resources and fast-track the process. Notwithstanding the reported challenges, NSFAS brought significant relief to poor South Africans.

The Department would maintain regular updates to ensure all these matters were dealt with.

He had differed with the National Treasury’s Director-General on the austerity measures that affected NSFAS, university capacity development programmes and community education. He had requested the revision of budget cuts in those areas. He had met with the Minister of Finance and he confirmed that in the upcoming budget statement, there would be a later engagement to revise the budget for education.

Institutions were also advised to cap their annual fee increases. He assured Members that the Department had taken steps to address all the issues that had come up in the sector. Some of the matters were with the SIU. Even with the National Skills Fund, action was taken and people were fired and handed over where necessary. In areas where evidence was presented, the Department would act.

Closing remarks

The Chairperson welcomed the Department’s remarks and commitment to uphold good governance and management. It would also assist the Committee in receiving a briefing outlining the overlaps between the work that Werksmans, SIU, AGSA and the Committee were doing. Bringing the Committee into confidence about how these efforts were synergised would be important.

Written responses were expected within seven working days. Regarding the 2021/22 annual report, the Committee would note in writing the concerns by Members that the report was insufficient to account for the funds voted for in Parliament.

The meeting was adjourned.