South Africa

CAMPUS STRIFE EXPLAINER

The NSFAS direct banking system and why students will march in protest to Parliament

The NSFAS direct banking system and why students will march in protest to Parliament
University of Witwatersrand students protest over financial exclusion on 15 March 2021 in Johannesburg, South Africa. (Photo: Gallo Images / Sharon Seretlo)

On Wednesday, 16 August, students will march to Parliament calling for Higher Education Minister Blade Nzimande to intervene against the new financial aid direct banking system, which, as well as angering students, has led to investigations by Outa and has seen a case lodged with the Public Protector.

On Wednesday, 16 August, the Students’ Representative Council (SRC) from Stellenbosch University will lead a march to Parliament to hand over a petition calling for the end to the new direct banking system implemented by the National Student Financial Aid Scheme (NSFAS). They will also call for a commission of inquiry into NSFAS’s affairs.

In addition, an online petition created by SRC vice-chairperson William Sezoe will be handed over at Parliament on Wednesday. 

Frustrations about the new banking system 

Daily Maverick has previously reported on students’ frustration over the system and how many of them were not informed properly about how it worked. 

Read more in Daily Maverick: ‘Uncertainty, anxiety and frustration’ — NSFAS students cry foul over new banking system

The new system came into effect in the middle of the academic year when students were on holiday or finishing up exams.

Students we spoke to and who reached out via email said the system, which is meant to disburse funds from the scheme directly into student accounts, was not being explained to them properly and in some cases, their funds were being withheld.

In May 2023, about 100 students marched to the NSFAS headquarters in Cape Town’s Foreshore over the disbursement of student allowances. 

But what does the banking system do? 

In addition to funding tuition, NSFAS provides allowances for accommodation to funded students. NSFAS also provides monthly amounts for transport, food and other living expenses. Previously, NSFAS disbursed these allowances through universities.

In 2022, NSFAS piloted the direct banking system at Technical Vocational Education and Training (TVET) colleges and in November 2022, plans were announced to expand the programme to universities. 

Higher Education Minister Blade Nzimande explained in his 2023/24 budget speech that NSFAS funded 1.1 million students in the 2023 academic year. Universities have been allocated R38.6-billion.

On its website, NSFAS said it had devised a system to cater to all beneficiaries to ensure funded students receive their allowances in a seamless and secure way. This came into effect in June 2023.

Criticism of the system  

Shortly after the new direct banking system’s implementation, funded students said they had not received funding for essentials such as food and transport. Uproar ensued, with Tshwane University of Technology students protesting about the missing allowances. EWN reported that NSFAS had also defunded some students.

Students at Durban University of Technology also protested because students had not received their allowances. The SRC from the University of Cape Town called on Nzimande to resign. 

Protests also reached the Union Buildings as a group of students demanded the system be scrapped. 

Read more in Daily Maverick: Students march to Union Buildings to demand that NSFAS scrap new ‘extra-fees’ payment system

High bank charges and Outa steps in 

One of the biggest challenges for students is the high bank charges involved in the new system. The Organisation Undoing Tax Abuse (Outa), which has been investigating NSFAS since last year, unpacked the exorbitant costs of the new system.

NSFAS’s direct banking system charges students R29 for a monthly bundle fee, while other banks charge as low as R10. Students are charged as much as R12 for a R100 withdrawal from ATMs, while other banks charge as little as R7.50 per R1,000.

Outa calculated that the bank account deal – where four service providers were tasked with disbursing the funds – could be worth R1.5-billion over the next five years.

The organisation raised concerns that of the four service providers, only one company had an affiliated banking licence, despite it being a tender requirement. Two of the four companies were also not registered VAT vendors. 

In August, Outa reported it could not find “any agreement between any bank and the service providers in November, and also not with the latest investigation”.

What does NSFAS say? 

Daily Maverick sent queries to NSFAS on Tuesday morning, but so far it has not responded. In July, NSFAS said it would investigate the complaints raised by students.

NSFAS made the announcement following meetings with student organisations. Service providers were also tasked with increasing their presence on campuses to assist students. 

Read more in Daily Maverick: NSFAS to investigate complaints after students vent frustration over new direct banking system

A meeting took place between Nzimande and NSFAS on 8 August. On 11 August, Nzimande said he condemned reports of violent protests that took place at “some universities”. He said he had been briefed by the NSFAS board on issues related to the high bank charges.

“Bank charges are inevitable; however, NSFAS negotiated for an R12 monthly bank charge, which excludes money transfer costs to other banks,” Nzimande said. 

In addition, NSFAS beneficiaries can use their bank cards anywhere within South Africa at any retailer and ATM, he said.

NSFAS board chairperson Ernest Khosa said during a media briefing on 7 August that a student-centred model was implemented in a bid to streamline all processes affecting the disbursement of funds.

“This was to avoid having too many role players in the application process as this had previously caused delays in funding decisions for students, payment of allowances and placement of students at residences conducive for learning.”

Khosa also said NSFAS embarked on a “fair and compliant” procurement process, with 18 bidders including major banks. 

Thus far, “a total of 355,270 paid students, which constitute 86% of the paid students have been able to successfully authenticate themselves and receive their allowances”, Khosa said. 

What happens next? 

Aside from Wednesday’s planned march and the handing over of a memorandum, Sezoe has laid a complaint with the Public Protector over the implementation of the new direct banking system.

In addition, the DA’s student structures have instructed their MP on the higher education oversight committee, Chantel King, to take their complaints to Parliament.

According to the Parliamentary Monitoring Group, NSFAS is scheduled to appear before Parliament’s higher education oversight committee on Wednesday, 6 September, over issues such as the disbursement of funds and allowances to students, student appeals and progress towards the opening of funding applications for the 2024 academic year. DM

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