SPECIAL REPORT | Student aid another piggy bank for fat cats

“I GAVE him a million rands for the Communist Party. Just imagine. For the conference. When there was nothing. I donated with the very same company that created T-shirts last year together with the bags.”

This is one of the sensational excerpts from two audio recordings totalling almost three hours that the Organisation Undoing Tax Abuse (Outa) made available to the media this week and shared with law enforcement officers.

The man speaking is Mr A. And the man he is referring to? Connect the dots, as Pravin Gordhan said at the time about Jacob Zuma and the Guptas. Who was the general secretary of the South African Communist Party for 20 years and who has been the minister in charge of higher education for 13 of the last 15 years? And who, while transport minister, appointed Ernest Khosa as non-executive director and later as chair of the South African Civil Aviation Authority board and then, when back at higher education, as chair of NSFAS?

None other than Blade Nzimande.

Mr A, one of the two men with whom Khosa twice met last August, is addressed by Khosa as Thula several times in the recordings. The Outa report identifies him as Thula Ntumba, an auditor and businessman who, with his brother Melusi, is involved in companies that have won tenders worth R39.7 million and R62.3 million at the Services Sector Education and Training Authority (SSETA) and R2.7 million at the Construction Education and Training Authority. In addition, Ntumba and Associates Consulting is also on the panel of NSFAS financial management companies.

Ntumba, whose wife, Tshegofatso, is one of two directors of the service provider Coinvest, met Khosa to try to find out what Coinvest's future looks like. This followed an Outa report on alleged irregularities in the appointment of four service providers (Coinvest, Tenetech, eZaga and Norraco) which led to an official investigation at NSFAS in August.

The investigation, led by Werksmans attorneys and advocate Tembeka Ngcukaitobi, corroborated the findings of Outa's investigation and led to the immediate dismissal of NSFAS CEO Andile Nongogo, a former SSETA CEO.

The Werksmans report recommended that NSFAS should terminate the contracts of the four service providers responsible for paying student grants since July 2023, due to irregularities in the awarding of the contracts. The four benefited from Nongogo's involvement in the bid evaluation process, did not have the necessary experience and are not registered financial service providers, something Outa flagged in October 2022.

“Unfortunately, all our warnings and pleas that NSFAS should investigate the awarding of the contracts before it affects the payment of students' allowances and costs the taxpayer unnecessary money have been ignored," says Rudie Heyneke, Outa's head of investigations.

Outa's investigation confirmed a huge den of corruption in the Department of Higher Education. “Our investigations into this already started in November 2018 when a whistleblower brought a bunch of SSETA contracts to Outa's attention," says Heyneke.

Among the first cases of corruption uncovered by Outa was a contract worth R163 million (in the end almost R170 million was paid out) between SSETA and Grayson Reed, a company that charged SSETA an exorbitant amount for the supply of biometric records for class attendance and the payment of grants to students.

Another contract with Star Sign and Print was also flagged by the whistleblower. This was for the supply of products such as exam pads, USB sticks and lanyards. There were clear red flags, such as 20,000 exam pads at R214 each (Game is charging R50 for three exam pads this week); 30,000 lanyards at R166.50 each (in 2018 they cost R3 at wholesalers); and 30,000 USB sticks at R167 each (at the time the wholesale price was R59). Ntumba's wife was also a director of this company.

Because of Outa's report, SSETA terminated the Grayson Reed contract six months early but the civil watchdog still insisted on seeing all the tender documents. “We ended up having to submit a PAIA (Promotion of Access to Information Act) application and go to court after it was refused, but when the investigation team recognised the surnames in 2022's NSFAS tenders for the payment of student allowances, they dug deeper," says Heyneke.

“Some of the individuals involved in the Grayson Reed and other contracts simply formed new companies with family members as directors, and a whole lot of contracts were awarded to these new companies by higher education institutions."

Outa's warnings about the appointment of the four service providers were ignored by the NSFAS board. NSFAS even threatened legal action over the use of the word “corruption” in an Outa press release. In February 2023, Outa issued a fresh warning, this time with evidence that none of the service providers had the necessary banking licences and that they planned to charge exorbitant fees for banking services to already needy students.

This news broke at the same time as many students who had just registered for the new academic year ended up on the streets after NSFAS unexpectedly decided in January to cut the housing allowance from R60,000 per student per year to R45,000. “Many pre-accredited service providers simply could not afford to take in students at the reduced amount," says Heyneke. “Many have made huge financial commitments to build student accommodation according to the strict NSFAS guidelines announced by Nzimande in 2015.”

When Outa revealed in the same report that NSFAS's new 8,479m² head office on Cape Town's Foreshore would cost almost R167 million over the contract period, and that the rent works out to about R74,000 per employee per year, the fat was in the fire. The 2020/21 NSFAS annual report indicated the number of employees as 383, with 68 vacant positions. If the office space were to be divided between 451 people, each would have 18.8m² at their disposal. Compare this to NSFAS students who had to sleep in public toilets, buildings on campus and libraries because they could not afford accommodation. Read more here.

After protests erupted on campuses nationwide over the housing crisis, NSFAS rushed to help find accommodation for students. (How many students simply accepted any available accommodation just to avoid sleeping on the streets will never be certain.)

Until the end of June, things were relatively normal on campuses of Technical and Vocational Education and Training (TVET) colleges and universities. Then Outa investigators said they had laid criminal charges against Nongogo, one of his former colleagues at SSETA and two SSETA service providers. The reason? A (once again) disproportionately expensive “rebranding" campaign that cost SSETA (and by implication, taxpayers) R36.9 million.

One of the most expensive items on the shopping list were white vinyl stickers with a SSETA logo printed on them that were used to mark a regular two-door kitchen cabinet (the kind you can buy from a hardware store) as the container in which tenders had to be placed in the lobby of the SSETA office. The price for the stickers? A breathtaking R302,010 — which didn't even include the cabinet. Outa requested a quote from another Johannesburg service provider. The price was R3,731,75.  Read more here.

Then came the next NSFAS shock in early July: hundreds of students complained on social media that they had not received their monthly personal allowances of R1,650 (payable for 10 months). From this amount, the students must pay for food, toiletries and transport to and from campus. “It was always R1,500, but at the beginning of 2023 Minister Nzimande announced with great fanfare that students would get a 10% increase. Just so that the extra 10% could later be swallowed up by the high costs of the NSFAS bank card," explains Heyneke.

On August 4, Outa issued another report about wheeling and dealing with a SSETA tender during Nongogo's tenure as CEO. This time there were quite a few prices that would have brought taxpayers to tears. T-shirts with the SSETA logo at R4,600 each, umbrellas at R44,000,  R980 for a coaster and R668,200 to print 100 copies of the SSETA annual performance plan. Read more about it here.

The NSFAS board could no longer ignore the pressure to have Nongogo formally investigated and try to calm students down. By this time, tempers were still running high over arrears of allowances and the four service providers who clearly could not cope with the flood of inquiries and payments. (Yet Nzimande has stated in the media that he has no cause for concern about NSFAS management as the board has assured him there are no problems.)

The audio recordings — excerpts of the first and second meeting can be heard here and here — are not the end of the problems for NSFAS, Nzimande, Khosa and others who are implicated. “The Special Investigating Unit (SIU) has been investigating NSFAS since 2022 and has progressed well with their investigation," says Heyneke. “A few preliminary findings  — which are in line with our own investigations — have also already been shared with parliament. Outa has already shared these audio recordings with the SIU in December 2023 and will soon file criminal charges against Nzimande, Khosa and Ntumba. We hope that the SAPS will thoroughly investigate the criminal complaint."

OUTA will also share its findings with the South African Revenue Service, the auditor-general, the public protector, Werksmans, Universities South Africa (the umbrella body for the 26 public universities) and other stakeholders. “It is very clear to us that needy students are the last thing on the minds of leaders like Nzimande, Khosa and Nongogo," says Heyneke.

“Last year we were approached by dozens of desperate students to help sort out the issue of grant arrears. For their sake, and also because we are passionate about preventing the wasting of taxpayers' money, Outa will not rest until action is taken against those who waste or steal funds intended for students. But at the same time we want to appeal to students to hold these unethical, selfish leaders accountable at the ballot box later this year."

Heyneke says the report will also be shared with Nedbank. “It's time for banks and the private sector to think about the companies they do business with."

All Outa's reports on corruption in the higher education sector will also be sent to the office of the chief procurement officer at the National Treasury. “We are going to ask for a thorough investigation into several questionable service providers at government institutions. Such companies should be listed on the National Treasury's list of suppliers with whom business should not be done."

NSFAS will have to put out several fires in the coming weeks. Not only in terms of Outa's findings but also in terms of at least 20,000 students' overdue 2023 grants and university fees. And there could be another student housing crisis waiting when campuses reopen. By October 4, only 25,803 (or 6.5%) of the 397,000 beds needed (according to NSFAS's own estimate) for NSFAS students nationwide had been accredited. It is doubtful whether the accreditation problems — which relate, among other things, to the appointment of inexperienced staff and service providers — have been resolved in the meantime.

According to Heyneke, Outa has already investigated irregularities in this regard. “We are also already working on a comprehensive report that will be presented to the parliamentary portfolio committee on higher education about all the irregularities that we have already uncovered in this sector. Believe me, there is much more.”

More revelations in recordings

Khosa, Mr A (Ntumba) and the currently unidentified Mr B and Mr C (who may be the same person) discussed the Outa report on Nongogo's involvement in SSETA corruption several times during both meetings. They speculated that Outa's report was part of a conspiracy against Nzimande, but Khosa felt the ANC itself posed the greatest danger to him and his comrades:    

Khosa: “The pressure will seize on us and on the minister in particular because the target was him [the minister]. Our enemy is the ANC, not Outa.”

Mr A: “But obvious Outa is a hired gun.”

Khosa: “The enemy is our own people who wants to move. This is Buti Manamela [deputy minister of higher education].”

Heyneke points out that it was not only unethical for Khosa to discuss council matters with service providers, but also illegal. In the interviews, Khosa also says the NSFAS board decided to leave the establishment of the terms of reference for the investigation to him as chair, a decision that suited him very well as (by his own admission) he knew about all the irregularities at NSFAS involving himself and Nongogo.

Khosa: “One of the resolutions of the board is to give all power to me. They said so in the resolution. Let’s say we investigate Andile, I know all the things that we did together in the corners, and I know why we can be caught. We have drafted the terms of reference and excluded anything that is a problem. The only thing that we are not be able to exclude in the investigations is to investigate the award of the four companies."

Nongogo's historical links with the service providers, as well as his presence during the discussion of tender applications, were pointed out by Outa as irregular and contrary to procurement procedures. The Werksmans investigation confirmed this.

One of the most shocking revelations from the audio recordings concerned Werksmans lawyers. Khosa wanted to know during the first conversation with Nthumba and Mr B if they could recommend a law firm that the NSFAS board could appoint to investigate Nongogo. But it couldn't be just any law firm…

Khosa: “You get a firm that you can manage. One of the reasons I’m going there, you must tell me which one. You must give me the firm."

Mr A: “It must be a law firm? We must give you Werksmans."

Khosa: “Werksmans? You sure?"

Mr A: “Ja, you must call Werksmans. You know, why are we using that name? When the report is out and you have used that name, what are they going to say? When the report is released by that name it's clear they won’t challenge it. And Werksmans, there are partners we know."

Khosa: “So, tell me, who is at Werksmans? Now that you've said Werksmans, I will use them.

Mr A: “But remember, it must be a certain partner, not anyone. So, I'm saying that you can't just take the name."

Mr B: “I think these things can be managed. So, it must be through the people you are working with [Mr B is talking to Mr A here]."

Khosa: “Who is the partner?"

Mr A: “I will have to check the name. I can come back with a name."

Khosa: “White or black?"

Mr A: “No, he is black. But the name, remember when it goes out it says Werksmans. Werksmans is Werksmans. Because that’s what all these people use, remember Transnet was Werksmans, Prasa is Werksmans."

Werksmans was then appointed to investigate Nongogo, something that was also discussed during the second meeting between Khosa, Ntumba and Mr C. However, Heyneke says Outa is satisfied with the outcome of the Werksmans investigation and recommendations. “If it was Khosa's plan to try to ‘control' Werksmans' investigation, the plan failed miserably." The involvement of Ngcukaitobi, widely regarded as one of South Africa's best, most irreproachable lawyers, obviously threw another spanner in Khosa's works.

Listening to how Mr A and Mr C talk about how they can put pressure on Khosa to keep the service providers on board, you realise where the expression “no honour among thieves" comes from.

Mr C: “You know, I want to send an SMS to say, Hi Morena, how did you became the chairperson of this thing with your history like this?"

Mr A: “You know what is key now George, he must understand that he can't now cleanse himself."

Mr C: “I’m going to send that thing today, Mr Ntumba, but as if I’m a journalist. I’m asking questions. How were you appointed with this history just to uncover that you have this and this and that how were you made chairperson of two things, you know? Surely you are more corrupt than the suspended CEO. Something like that."

They refer to the corruption charges brought against Khosa after an investigation by PricewaterhouseCoopers (PwC). Khosa was the chief executive of the Mpumalanga Economic Empowerment Commission (MEEC), now known as the Mpumalanga Economic Growth Agency, but resigned in 2005, shortly before a damning forensic investigation by PwC implicated him in systemic fraud, corruption and mismanagement. According to PwC, Khosa was involved in facilitating multimillion-rand loans to MEEC board members and senior management. Criminal charges were brought against him but were withdrawn in 2011 in the Nelspruit Regional Court.

And later:

Mr C: “Because the way he is dealing with us, he is becoming an enemy and he’s misleading us, taking our monies and everything else. Because this thing is on the internet it's still there."        

Mr A: “So, it means that these people are fighting for that six million. Remember at some point he was demanding. He said he and the minister want six million."

In the recordings, there are also references to how various people “looked after" Khosa in the years before Nzimande first appointed him to the CAA board then as chair of NSFAS. Ntumba and Mr C also discuss how Nzimande is aware of Nongogo's modus operandi, as well as how things will go according to Khosa for those who “look after" the minister.

Mr A: “So, he doesn’t say anything about the minister?"

Mr C: “No, he is not saying anything."

Mr A: “What is his discussion with the minister?"

Mr C: “The only thing he says is if you can undertake to take care of the minister, it’s not a problem. It’s a monetising mentality. Taking care of the minister means that you must give him things."

One of the key points in both discussions is the fear that Coinvest and the other three service providers' contracts would be terminated. Ntumba and Mr C decided they would try to convince Khosa to keep them on board for at least another three months if Werksmans recommended it.

Mr C: “But me, I'm saying, Mr Ntumba, if we can have this report even for four months, three months, it's minimum. There is nothing, but we will manage the noise. Remember now they are happy now that there’s investigations. These ones want to rush it, next week or two weeks."

Mr A: “That’s why I’m saying, I don't know what the end game is."

Mr C: “But if we could push for three months and plan the end game proper instead of saying we want to take out Coinvest, we want to take out all of you."

This plea apparently did not fall on deaf ears, because even though it was one of the Werksmans report's recommendations, and even though Khosa solemnly undertook in public that the NSFAS board would comply with all the recommendations, the four service providers' services have not yet been terminated.

Even though they have failed miserably in paying students' allowances.

Listen to the full audio recordings of the first and second meeting.

♦ VWB ♦

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