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Unregistered Fintech Companies Handling NSFAS Allowances Spark Outcry

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Unregistered Fintech Companies Handling NSFAS Allowances Spark Outcry

Unregistered Fintech Companies Handling NSFAS Allowances Spark Outcry. The National Student Financial Aid Scheme (Nsfas) has come under scrutiny due to its engagement with four non-registered financial service providers responsible for disbursing allowances directly into students’ bank accounts.

Outa, the Organisation Undoing Tax Abuse, has disclosed these findings as part of their update on the direct payment of Nsfas benefits. The use of this direct payment system has generated significant backlash, culminating in student protests at the Union Buildings in Pretoria.

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Unregistered Nsfas Allowance Providers Raise Concerns

Four companies, namely Tenet Technology, eZaga, Norraco Corporation, and Coinvest Africa, were contracted by Nsfas to administer allowances directly to student beneficiaries. However, these entities lack the status of registered financial service providers and are relatively new in the fintech sector, with limited evidence of experience. Outa’s updated investigation report highlights these discrepancies, fueling concerns over the competency of these firms to manage financial transactions.

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Student Uproar Prompts Campus Closures

The implementation of the direct payment system has led to uproar among students, prompting protests and disruptions at several universities. The North West University (NWU), the University of the Free State (UFS), and Vaal University of Technology (VUT) had to suspend in-person lectures due to student protests against excessive bank charges imposed by these fintech companies.

Durban University of Technology (DUT) shifted to online learning after facing similar protests. Detractors point out that the previous approach involved payments managed by universities or their contracted service providers.

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Details of Allowance Deductions and Provider Contracts

Students’ monthly allowances, set at R1,650, have been subjected to various deductions, including R12 for banking fees, R10 for ATM withdrawals, and R2.50 for every R100 withdrawn. Nsfas, funded by the Department of Higher Education, targets students from economically disadvantaged backgrounds, with an annual household income ceiling of R350,000.

The four companies, under five-year contracts, are tasked with dispensing funds directly to beneficiaries across the country’s public universities and technical vocational education and training (TVET) colleges.

Financial Gains of Unregistered Providers Raise Concerns

Media reports have highlighted the financial gains these companies stand to make from the arrangement. The calculations, based on the number of university students onboarded to the new payment system, suggest that the four entities could collectively earn approximately R4.3 million per month through the R12 banking fee deduction.

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Outa’s Comprehensive Findings

Outa’s 59-page report, released recently, underscores several crucial findings:

  1. The new tender had significantly fewer mandatory requirements compared to previous tenders.
  2. The mandatory banking license requirement was substituted with alternatives like bank affiliations or sponsorships.
  3. The alleged sponsor bank, Access Bank, is not recognized for official state transactions.
  4. None of the four awarded service providers submitted bids in previous tenders.
  5. Only two providers are registered VAT vendors despite anticipated high turnovers.
  6. Nsfas initially negotiated a higher monthly fee but later lowered it significantly.
  7. Comparative research indicates other banks offering more student-friendly services.
  8. The Nsfas payment scheme could cost students collectively over R3 billion during the service providers’ contract period.
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Outa’s Recommendations and Industry Response

Outa’s recommendations include halting student onboarding until fee clarity is achieved, involving the auditor-general, SA Revenue Service (Sars), and the public protector in assessing the situation, and drawing attention to discrepancies found in the system.

The involved companies have responded variably, with Tenet Technology referring inquiries to Nsfas. Representatives from Cointech Africa and eZaga did not provide comments. Nsfas board chair Ernest Khosa reported cyberattacks on fintech company websites, suggesting an attempt to compromise student data and the safety of the new system.

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Conclusion

The engagement of unregistered financial service providers to manage Nsfas allowances has stirred controversy and student protests. The concerns about these companies’ competence and the financial implications for both students and taxpayers raise questions about the efficacy of the current system. Outa’s comprehensive findings provide insight into the issues, prompting calls for further investigation and accountability within the Nsfas allowance distribution process.

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