NSFAS fintech partners to challenge contract cancellations

Simnikiwe Mzekandaba
By Simnikiwe Mzekandaba
Johannesburg, 26 Oct 2023
Two of the fintech partners have challenged the allegations and are mulling legal action.
Two of the fintech partners have challenged the allegations and are mulling legal action.

Two of the fintech partners contracted to disburse monthly allowances to National Student Financial Aid Scheme (NSFAS)-funded tertiary students have challenged the allegations levelled against them, mulling legal action.

Service providers Coinvest, eZaga Holdings (eZaga), Noracco Corporationand Tenet Technology were awarded the NSFAS direct payments contract, to the value of R47 billion.

However, the NSFAS board last week announced it had decided to cut ties with the firms after an investigation of their appointment uncovered “conflict of interest”.

Further, reports emerged this week that the board fired suspended CEO Andile Nongogo, after the investigation established he actively participated in the bid evaluation process. The probe also flagged a possible relationship between him and some of the providers.

eZaga and Tenet Technology have denied the allegations made against them, claiming to not have received the full report in which these were made.

Left in the dark

Briefing media on the findings of the investigation, NSFAS chairperson Ernest Khosa said the board wrote a letter to now-fired CEO Nongogo and gave him a copy of the report.

Additionally, it met with the representatives of the four direct payment service providers, to bring the content of the report and its implication to their attention, said the chairperson.

Tenet Technology CEO Ryan Passmore has denied the chairperson’s meeting claims.

In regards to Tenet Technology, the investigation report said the company would be subcontracting to a firm known as Coralite.

“The investigators conducted a CIPC [Companies and Intellectual Property Commission] search on the company and the search revealed that some directors of Tenet Technology are the same directors of Coralite. This clearly indicates there is a relationship between the directors of Tenet Technology and Coralite,” said Khosa at the time.

On the meeting, Passmore says: “The chairman of the NSFAS board indicated verbally the morning of the media briefing that they received an independent report. NSFAS has not shared the report with us nor communicated further.”

Passmore adds the company is only aware of the media reports of a cancellation. “We will, however, challenge any cancellation that is unlawful and without cause.”

Responding to whether there is any truth to the allegation that Tenet Technology has a relationship with Coralite, the CEO says it is one of the subcontractors.

“We currently engage with many subcontractors, and most are 100% BEE. It is important to note there are no common shareholders, as alleged, with any subcontractor.”

Like Tenet Technology, eZaga says numerous allegations have been made against it, but it has yet to receive the full report in which these claims were made, despite numerous requests.

“Due to recent developments over the past week, eZaga is considering the possibility of taking legal action against the NSFAS in order to obtain the report and address any potential harm to our reputation caused by these allegations. It is regrettable that the NSFAS has not yet provided eZaga with the report, which could potentially result in significant financial difficulties for students.

“Furthermore, this situation is hindering eZaga's ability to pursue legal remedies, leaving us in a state of uncertainty. eZaga once again extends an invitation to the NSFAS to share a copy of the report. If the report's integrity is unquestionable, there appears to be no reason for the NSFAS to withhold it, and we strongly urge them to do so, as this will ultimately serve the interest of the public and most importantly the interest of the students.”

eZaga further denies allegations of a possible relationship with Nongogo, claiming these are unfounded. “We want to clarify that our interactions with Mr Nongogo were conducted professionally and in accordance with the terms of our contract. The suggestion that the relationship was collusive in nature is devoid of substance. We have always acted in the best interests of the students and the education system.”

On the bid evaluation process, eZaga says it was awarded the contract through a competitive bidding process, and did not have any influence over the selection process.

“We fully cooperated with the NSFAS during the procurement process too. We did not have any undue influence on the selection of the winning bidders and had no prior relationship with any NSFAS officials.”

Broad repercussions

An entity of the Department of Higher Education and Training, the NSFAS runs a close to R50 billion annual budget, providing financial aid to eligible students at public TVET colleges and public universities.

It has faced numerous challenges over the years, including IT system failures and mismanagement within the scheme, and more recently,leadership instability.

According to Khosa, when something goes wrong at the NSFAS, it immediately affects 1.1 million students, and when factoring in parents and siblings, it affects more than six million people at a go.

The newly-implemented direct payment system resulted in the scheme being at odds with students on issues and allegations relating to the system.

NSFAS beneficiary students expressed their discontent over the direct payment system, engaging in protest action, as well as filing complaints with the Public Protector and the South African Human Rights Commission.

There were also cyber security threats with the direct payments to students, with the NSFAS revealing that cyber criminals tried to gain unauthorised access to its payment infrastructure and that of its fintech partners.

In a previous Parliamentary reply to a question from Democratic Alliance MP Chantel King, higher education minister Dr Blade Nzimande noted instances of cyber attacks among the challenges that threaten NSFAS student accounts and system integrity.

Nzimande also pointed to resistance from institutions, students and student leadership to adopt the new payment system. Students have also expressed that the direct payment charges are excessive, he said.

Despite these challenges, Khosa said the NSFAS board remains committed to implementing the direct payment system.