AN investigation conducted by the civil society group the Organisation Undoing Tax Abuse (Outa) into allegations of corruption and irregularities has uncovered how millions were looted at the National Student Financial Aid Scheme (NSFAS) and Service Sector Education and Training Authority (SSETA).
The investigation revealed how service providers and public servants formed a network to assist each other in tender processes and got involved in business relationships.
Outa also found that there were close links between officials in the Department of Higher Education and service providers where tenders worth millions of rand were awarded.
These revelations follow an investigation into corruption and irregular contracts at the SSETA after a successful PAIA application relating to a R163 million tender for a biometric attendance monitoring system awarded to the Grayson Reed consortium.
Outa said Grayson Reed's bid was one of the contracts that were tainted with irregularities, fraud and corruption.
The group said the findings were handed to the Special Investigating Unit (SIU) for further investigation.
SUI spokesperson Kaizer Kganyago confirmed that the investigating unit received a report from Outa. Kganyago said the SIU investigation into the specific focus area is ongoing, but refused to comment on the context and findings due to SIU's legislative prescripts.
The Outa investigation revealed that some of the same people who were involved with the Grayson Reed contract were together with their business associates and family members involved in numerous tenders and contracts across SSETA and other institutions within the Higher Education Department.
The network, according to the investigation, reaches far and wide. It involves chief executives of private companies, lawyers, accountants, family members of service providers, higher education officials, members of accounting authorities, individuals employed and formerly employed by the Auditor General and individuals in the office of the Ministerial office.
The SSETA contract with Grayson Reed Consulting was awarded in October 2017 and ran for two years.
Outa started investigating allegations of corruption and mismanagement of funds in the contract after being alerted by a whistle-blower.
The group found a series of irregularities pertaining to travel and accommodation claims worth R2 168 million. Most invoices were submitted without source documents. Some had source documents that did not back up the claim or appeared to be fraudulent. Other costs were not incurred by Grayson Reed but by other entities.
Outa said the SSETA travel and accommodation policy was ignored.
Outa also found that the bid for the tender was advertised four days before the closing date.
“The bid was published in the government Tender Bulletin on August 25, 2017, and closed on August 29. The National Treasury Regulations require that a tender be published for at least 21 days before the closing date.”
Outa said Andile Nongogo was SSETA chief executive when the tender was awarded. Themba Mhambi was the chairperson of the accounting authority, while Amanda Gcoboka-Buzo was the legal officer.
Outa’s portfolio manager Rudie Heyneke this week opened a criminal case against Nongogo, as well as one of his former colleagues and two others from Five Star Communications and Projects.
The criminal complaints relate to the over-inflation of a specific tender, awarded to Five Star in August 2016. It is alleged that Five Star over-inflated its bid for the branding of a tender box by a whopping 8 000%, or at least R292 000. Heyneke said Outa uncovered this irregularity while investigating other dubious SSETA tenders.
The investigation also revealed that NSFAS hired service providers without them having the required banking licences while paying out student allowances at excessive rates relative to the market.
The scheme also hired a business that provided cloth masks to the National Treasury in 2020 to work on an Information and Communication Technology (ICT) contract and 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 in student subsidies.”
The organisation said it was looking into the following tenders:
- SCMN022/2021: A five-year contract for the direct payment of NSFAS allowances to students, which Outa believes could be worth at least R1.5 billion.
- SCMN004/2021: A three-month contract to supply a digital tool to calculate student allowances.
- SCMN015/2021: The leasing of the NSFAS head office for two years, renewable for a further three years.
“Outa questions the value of these contracts, particularly in the light of the NSFAS reduction of subsidies for student accommodation,” said Heyneke.
The tender for paying NSFAS allowances to students
NSFAS hired businesses – Coinvest Africa, Tenet Technology, Norraco Corporation and Ezaga Holdings – without banking licences or VAT registrations to make direct payments of student allowances. The contract cost about R5 billion over five years.
Student allowance calculation tool tender
The contract was awarded to Futgenx Technologies at a cost of R4 053 million for three months. The company was paid R3 265 million despite its failure to finish the job.
The new contractor, Idol Consulting, charged close to R2 million to complete the job, and this resulted in NSFAS overpaying by R1 116 million.
The NSFAS office lease
In March 2022, NSFAS signed an office lease with Dynamic SA Holding for offices in the Halyard building in the Foreshore in Cape Town. Although the lease agreement indicates that Dynamic SA is the landlord, a deed search shows that the building owner is Ziningi Properties.
The lease was signed for five years, backdated to start on February 1, 2022. The offices total 8 479 square metres and the cost over the rental period is R166 906 million, including VAT and escalations.
Outa said that based on 451 employees, NSFAS will be paying an average of R74 000 per employee per year to lease this building. The organisation noted NSFAS has cut its subsidies for student accommodation to R45 000 per student per year, leaving many students unable to afford accommodation.
NSFAS did not respond and SSETA said questions were referred to relevant management for a response, and they also failed to respond.