Johannesburg - The Organisation Undoing Tax Abuse (Outa) claims companies contracted by the National Student Financial Aid Scheme (NSFAS) to pay allowances directly into students’ bank accounts are not registered financial service providers.
This comes amid countrywide protests against ineffective new payment systems by NSFAS.
Rudie Heyneke, portfolio manager at Outa, said payment contracts had been given to relatively new firms with very little proof of experience as financial technology companies.
"We could not find any proof that they are in alliance or have a sponsor bank so that they can operate as payment providers. And that’s a serious question; these companies are moving more than a billion rand a month.
"Surely they should be regulated, and that is the issue we have with their experience and with their means of being a financial service provider," Heyneke said.
Outa said its investigation into the matter revealed the funding organisation had failed to ensure proper controls and hired companies without the requisite banking licences.
"NSFAS also hired a business that provided cloth masks to the National Treasury in 2020 to work on an ICT contract and has rented an expensive head office space while slashing the subsidies for student accommodation.
"We believe these tender awards are irregular. We question whether awards such as these are unnecessarily draining NSFAS resources and contributing to its cuts to student subsidies," Outa said in a statement.
According to Outa, the Special Investigative Unit (SIU) had also been investigating these allegations since last year.
Outa added a deal involving this new payment system would cost the government R1.5 billion over five years.
"Outa's research shows that most of the commercial banks in South Africa offer accounts structured for students with very low banking fees and costs and substantially more value-added services.“
Attempts to get comments from the Department of Higher Education, Science, and Technology of South Africa and NSFAS were unsuccessful at the time of going to print.
Outa said at least four new companies successful in their bids did not have banking licences, with eZaga Holdings being the only company with an affiliated banking licence with Access Bank.
"We believe that students are being locked into very expensive deals aimed at benefiting the service providers and not the students… Outa has seen documentation that shows that the initial service fees on the proposed NSFAS card would be approximately R102.
“After a letter to NSFAS, this was quickly changed to R29," Outa said.