The board of the National Student Financial Aid Scheme (NSFAS) has announced that CEO Andile Nongogo has been issued with a notice to provide reasons why his contract should not be terminated following conflict of interest findings against him.

Nongogo did not respond to calls and text messages from Daily Maverick.

Briefing the media in Pretoria on Wednesday, 18 October on the outcome of its investigation into allegations against Nongogo and the companies contracted to disburse allowances directly to students, the NSFAS board, led by chairperson Ernest Khoza, also indicated that the contracts with the companies would be terminated.

“The board will ensure that this termination does not affect the students negatively,” he said.

Students from Western Cape universities protest on 16 August 2023 against the National Student Financial Aid Scheme direct payment of allowance system. Photo: Ziyanda Duba)

The investigation was conducted by Werksmans Attorneys and advocate Tembeka Ngcukaitobi SC in August 2023 after Nongogo was placed on special leave in connection with the allegations.

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A tender for direct payment service providers was issued and advertised on 25 January 2022. The closing date was 25 February 2022.

Four service providers were appointed to facilitate the direct payment of allowances to students – eZaga Holdings, Coinvest Africa, Tenet Technologies and Norraco Corporation.

Khoza said the board met on Sunday, 15 October in Pretoria to consider the report’s findings and recommendations. He said it had since adopted the recommendations and resolved to implement them.

Higher Education, Science and Innovation Minister Blade Nzimande was briefed on Tuesday, 17 October, on the outcome of the investigation.

Read more in Daily Maverick: The NSFAS direct banking system and why students will march in protest to Parliament

Findings

Khoza said Nongogo had been given a copy of the report on Tuesday.

The investigation focused on:

• The method of direct payments;
• Allegations against Nongogo;
• Conflict of interest in the appointment of the service providers; and
• The review of the NSFAS supply-chain policies and procedures and the legal compliance of the procurement system.

Khoza said the investigation established that Nongogo actively participated in the presentation to the Bid Evaluation Committee (BEC) of proposals by service providers.

“This is a material violation of public procurement processes of NSFAS which he was employed to safeguard and uphold,” Khoza said.

He said it seemed that there had been a conflict of interest in the appointment of the four fintech service providers.

The report, Khoza said, also stated that Nongogo appointed a technical adviser, whose name is known to Daily Maverick but who could not be reached for comment, to assist the BEC.

“This appointment was inherently incorrect, as the 2021 Supply Chain Management (SCM) Policy does not provide for the appointment of an expert to the BEC,” he said.

University students protest in Cape Town on 16 March 2023 against the introduction by the National Student Financial Aid Scheme of the direct payment of allowance system. (Photo: Ziyanda Duba)

Khoza said the report noted that this had been altered in the 2023 SCM Policy to cure the defect of appointing an adviser.

“What is more noteworthy is [the adviser’s] association with certain companies that were appointed as service providers, both at the Service Sector Education and Training Authority and at NSFAS.”

Companies

Khoza said the companies mentioned in the report included eZaga Holdings, of which eZaga Remit is a subsidiary, Africawide Consulting (Pty) Ltd and Africawide Foundation.

According to the report, Khoza said there was a possible relationship between Nongogo, Coinvest and eZaga Holdings.

Khoza said another concern was “not conducting a thorough due diligence of the service providers”.

He cited Tenet Technologies, which in its presentations mentioned that it would be subcontracting to a company known as Coralite (Pty) Ltd.

The investigators, he said, conducted a Companies and Intellectual Property Commission search on the company which revealed that some directors of Tenet Technologies were directors of Coralite.

“This clearly indicates that there is a clear relationship between the directors of Tenet Technologies and Coralite.”

Khoza said the board also met the representatives of the four service providers and brought the content of the report and its implications to their attention.

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Notwithstanding the current challenges, Khoza said the board reaffirmed its commitment to implementing the direct payment solution, which has led to student protests at several universities over complaints of exorbitant fees and late payments.

“The board views the direct payment solution as a necessary measure to reduce instances of unauthorised access to beneficiaries’ allowances, payment of ghost students, inconsistencies and delayed payments of allowances. The direct payment solution is in line with the Student-Centred Model which NSFAS adopted.”

No feasibility study

Khoza said the board had noted that no feasibility study had been conducted before the current implementation of the direct payment system, particularly the justification for the appointment of the four service providers.

“There was no reason furnished to the investigators why the feasibility study was not conducted, which is a critical part of the project preparation for the implementation of the project.”

Such an assessment, he said, would have enabled NSFAS to make an informed decision on the proposed solution and to evaluate the practicability and chances of success of the proposed solution.

He said the board also noted that there was an amendment to the bid specification to include fintech companies, which resulted in drastic changes to the mandatory requirements of the original bid.

“These changes would have required deeper analysis to be conducted, amongst others, on the need to appoint four fintech companies and their value-added services, the service direct costs to students and the details and the cancellation of the 2020 tender, which was a precursor to this bid under investigation.”

Khoza said NSFAS staff associated with any wrongdoing in the report would undergo a disciplinary inquiry.

A review of the SCM policy will be undertaken, in line with the National Treasury Regulations and Policies, including the Public Finance Management Act.

“All these decisions of the board will be implemented progressively, from today, 18 October 2023,” Khoza said. DM