State-run institution that gets R54 billion from the government pays three companies to do its work

The National Student Financial Aid Scheme (NSFAS) has an annual budget of R54.3 billion, yet the public entity pays three private companies to do its administration tasks. 

This is indicative of the broader inefficiencies at NSFAS, which plays a vital role in increasing access to higher education and creating a more productive workforce in South Africa. 

NSFAS provides financial assistance to eligible students who have been accepted at any of the 26 public universities or 50 TVETs in South Africa. 

Notably, it does not financially assist individuals who wish to go to privately-operated higher education institutions, such as Stadio and Emeris. 

The entity only grants funds for approved undergraduate programmes, with no funding provided for postgraduate courses. 

This has come under increasingly intense scrutiny, with critics arguing that in a modern economy, students cannot afford to stop after completing their undergraduate studies. 

However, a report from the Centre for Risk Analysis (CRA) as part of its broader study into education in South Africa shows that NSFAS is chronically underfunded and mismanaged. 

This makes it a largely ineffective organisation that cannot fulfil the vital role it was designed for in South Africa and ensures it is the subject of intense scrutiny from the National Treasury and education activists. 

The CRA pointed out that all qualifying students should benefit from financial support, as education is a vital element in improved productivity, employment, and faster economic growth. 

However, not enough funding is available for NSFAS to perform this function, and the administration of funds remains highly inefficient. 

As of 5 February, the CRA’s analysis of NSFAS data shows that it has approved 660,038 students for bursary funding and a further 1,561 have received loans from the entity. 

This means that NSFAS provides financial support to over half of all students at South Africa’s public universities and TVET colleges. 

This points to a significant burden on an institution that is underfunded and lacks the capacity to do its intended job, despite it receiving nearly 40% of all post-school education funding. 

NSFAS should be scrapped

NSFAS is increasingly seen as a public entity that is plagued by systemic failures and maladministration that prevent it from providing the service it should. 

The situation at the entity has caught the attention of Finance Minister Enoch Godongwana, who said he does not see the value of NSFAS.

Godongwana explained that the issue is not the need for higher education funding, but rather whether an institution in the form of NSFAS is the right mechanism to do so.

NSFAS has routinely been hit with disclaimer audit opinions from the Auditor-General, which is the worst possible rating and indicates significant financial mismanagement. 

Apart from this mismanagement, the entity is also struggling to perform key functions, such as processing applications and accrediting university accommodation. 

The organisation’s IT infrastructure also regularly experiences “system glitches” when processing the 1.5 million applications NSFAS receives each year. 

On top of these glitches, students are often incorrectly rejected or approved, and registration data is not synchronised with universities.

The mismanagement extends to the point of funding “ghost students”, with a recent audit showing that as many as 800 deceased individuals received monthly allowances from NSFAS. 

Godongwana explained that this is all part and parcel of what the National Treasury refers to as “unproductive expenditure”. 

“We must remove unproductive expenditure and redirect those resources to productive expenditures. It is good to say it, but politically it is a difficult task,” Godongwana said. 

“I mean, I am known, for example, for saying that I do not see the value of NSFAS. Not the bursaries it gives out, but the institution.”

Godongwana said the government is spending R700 million on just the administration of NSFAS, which could pay for an additional 9,000 students to attend university. 

“NSFAS is supposed to be paying universities for student accommodation and everything else, but, in turn, they have employed three other service providers to provide the service they were created to do. Why should we keep them?” Godongwana asked. 

“There are many people with sentimental attachment to NSFAS, and they are attacking me. I have learnt that to be the Finance Minister, you don’t have to be loved by everybody. You have got to state facts as they are.”