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The National Student Financial Aid Scheme (NSFAS) has won its long-running fight to sever ties with four companies that previously paid student allowances after the Western Cape High Court declared their contracts unconstitutional, unlawful and invalid. The judgment vindicates NSFAS’ contention that the tender process used to award contracts to eZaga, Coinvest, Noracco Corporation and Tenet Technology in 2022 was riddled with irregularities, including the direct involvement of the then-CEO Andile Nongogo and a lack of price competition between bidders. There is, however, a sting in the tail, as the court found no evidence that the fintech companies were complicit in the tender irregularities and ordered cash-strapped NSFAS to pay compensation for the losses they incurred since it stopped using their services two years ago. University students currently receive their NSFAS allowances via their institution, while students attending Technical and Vocational Education Training (TVET) colleges receive their allowances directly.Former NSFAS CEO Andile Nongogo. Picture: SUPPLIED NSFAS spokesperson Ishmael Mnisi declined to speculate on the scale of the compensation claims likely to be sought by the companies or the potential impact on NSFAS finances. NSFAS recently told parliament it faces a potential budget shortfall of R10.46bn for the 2026/27 financial year. Its current budget allocation is R54.8bn.In mid-2022, NSFAS awarded contracts to eZaga, Coinvest, Noracco Corporation and Tenet Technology to provide direct payments of allowances to students at universities and technical and vocational education training colleges. The five-year contract was worth R49bn, according to the judgment. The contracts were controversial from the outset, with students complaining about the charges levied by the fintech companies. These charges were initially set at R89 a month, about 5%-6% of students’ monthly allowances, but later reduced to R12 a month with additional fees for each transaction.The judgment, handed down last week by a full bench, draws on the evidence set out in an investigation report by Werksmans Attorneys. It found NSFAS failed to obtain necessary Treasury approval before cancelling the tender a second time and that then-CEO Nongogo was irregularly involved in the tender process. It found no risk assessment study had been done on using fintech companies to pay student allowances, no due diligence was conducted on the bidders and no rationale was provided for assigning the job to four companies.It also highlighted the lack of price competition between bidders, who conferred after the tender award was announced and then agreed on a uniform bundled fee. “The price was thus no longer determined through rivalry but through agreement between appointed bidders,” says the judgment. This lack of price competition contravened section 217 of the constitution, it said. “This judgment marks a significant milestone in our unwavering commitment to uphold good governance, transparency and accountability in the administration of public funds,” NSFAS said in a joint statement with the Special Investigating Unit. “[It] not only vindicates our efforts in identifying and addressing significant governance failures but also reinforces our resolve to root out maladministration and safeguard the integrity of public procurement processes, ensuring that resources entrusted to NSFAS are used in the best interests of South Africa’s students,” it added.eZaga said it would abide by the court ruling. It declined to comment on the scale of the compensation it would seek from NSFAS, saying it had yet to be calculated and submitted to the court in accordance with the terms set out in the order. • This story was updated on June 15 to include comment from eZaga.
