Taking a leaf from Clint Eastwood’s 1966 western classic The Good, the Bad and the Ugly, we can draw similar parallels with the historical evolution and current outlook for our prolific National Student Financial Aid Scheme (NSFAS).
The good
From its humble beginnings in the early 1990s, NSFAS has grown from a budget of R33m in 1991 serving 7,240 students, to about R47.6bn in 2023 supporting 1.1-million students in 26 public universities and 50 technical vocational education & training (TVET) colleges. The fund caters to children of the working class and poor who want to further their studies in public universities and TVET colleges.
The National Skills Fund (NSF) and NSFAS have become the financiers of higher education for most South Africans enrolled in higher education institutions. At a basic level, NSFAS represents the government’s deliberate intervention to broaden access to those sections of our communities that had no access to post-school education and training.
At its presentation to parliament’s higher education portfolio committee in 2015, the Council on Higher Education reported that there were 495,348 students in institutions of higher education in 1994. About 44.7% of these students were white and 42.8% African, with the coloured and Indian population making up 12.5%.
By 2023 there were 1,112,439 students in SA’s higher education system, which was an increase of 41,545 students compared with 2022.
Since its inception, NSFAS has supported more than 5-million beneficiaries, producing hundreds of thousands of skilled professionals and economically active middle-class individuals, especially from within the poor and working-class sections of society.
I consider this one of the most important achievements of this government over the past 30 years of our democracy.
The bad
It is clearly not desirable that NSFAS is currently under a second administrative intervention within five years of the conclusion of the previous intervention. The underlying causes of this intervention are maladministration and mismanagement, which have combined to produce corruption in the NSFAS grant payment system.
Corruption within NSFAS undermines section 29(1)(b) of the constitution, which states that “everyone has a right to further education which the state, through reasonable measures, must make progressively available and accessible”.
To this effect, the December 2017 presidential pronouncement on fee-free higher education has broadened access to and facilitated progressive realisation of this constitutional imperative, thus turning NSFAS into a full bursary provider.
It remains our goal to expand access to higher education and training opportunities, and improve the quality of the provisioning, responsiveness and efficiency of the post-school education and training system.
Therefore, the relative efficiency of NSFAS in discharging its statutory responsibilities will remain my constant concern during my term of office.
In April my predecessor, Blade Nzimande, appointed Sithembiso Freeman Nomvalo as NSFAS administrator and simultaneously dissolved the board. As administrator, Nomvalo takes over the governance, management and administration of NSFAS for a period of 12 months, ending in March 2025.
His task also involves resolving the data integration challenges as a matter of urgency, finalising all the necessary funding decisions and outstanding payments, including student accommodation, and overseeing the opening of the 2025 online application process.
The NSFAS board was dissolved due to its failure to oversee the timely payment of student allowances by management, or to carry out and implement some of the most basic responsibilities allocated to it. The board could not fulfil its fiduciary duties, such as the mandatory submission of audited financial statements and annual reports to parliament.
These and other failures resulted in unnecessary stress for students, parents and service providers, and also continue to threaten the stability of some of our colleges and universities, for which I sincerely apologise.
The ugly
Opportunism and greed have permeated NSFAS at both administrative and governance levels. The sacred responsibility to act in the best interest of the many has been superseded by the narrow and selfish interests of the few.
The appointment of direct payment service providers — the so-called fintech companies — was neither necessary nor desirable. By virtue of the number of beneficiaries involved and the profile of families directly affected by NSFAS funding, when something goes wrong with payments to students, institutions of higher learning or auxiliary support service providers such as transportation and accommodation, the impact is not negligible.
While acknowledging that NSFAS has grown over time, it is selfish of direct payment service providers to profit from a fund financed by taxpayers for beneficiaries whose needs are significant.
A 5% surcharge per transaction to student beneficiaries accrues R500m profit a year to direct payment service providers. These charges overburden NSFAS’s expenses, thus reducing the number of beneficiaries who could be funded with that R500m. This is certainly not the most optimal use of public resources.
Crude calculations show that the four direct payment service providers will earn about R10bn profit from the NSFAS over a 10-year period. With inflationary adjustment over the same period, this is clearly an exceedingly profitable business venture.
It is equally concerning that the appointment of direct payment service providers was made with neither due diligence nor a feasibility study to establish sustainability of surcharge costs to direct payment solutions over time.
There was therefore negligence and gross dereliction of duty on the part of both the then NSFAS board and the CEO. Whether decisions taken amount to improper or unlawful conduct by employees or officials of NSFAS, unlawful appropriation or expenditure of public money, or even irregular or unapproved acquisitive acts, is for the courts to adjudicate.
The way forward
On July 15, in a matter to which I was the fifth respondent, the Western Cape High Court ruled in favour of the four direct payment service providers, in effect interdicting NSFAS from cancelling its contract with them.
The judgment interdicts NSFAS from paying students through a financial institution, and instructs NSFAS to implement its service level agreement. However, it is my belief that the order is effective pending a decision of the special tribunal constituted in terms of the Special Investigating Unit. Further, NSFAS has since commenced with appeal processes against this decision as part of mitigating unwarranted long-term costs of surcharge due to direct payment service providers.
It is our moral responsibility to resolve these and other matters in the shortest period possible. We understand the magnitude of this responsibility as institutional inefficiencies have a direct effect on our solemn commitment inscribed in the Freedom Charter — that “the doors of learning and culture shall be opened”.
It our commitment to root out corruption and maladministration in the NSFAS grant payment system.
• Dr Nkabane, an ANC MP, is higher education & training minister.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.