NSFAS overhaul underway after R1.7 billion misallocation as the South African government moves to strengthen oversight and accountability within the National Student Financial Aid Scheme following major findings by the Special Investigating Unit (SIU).

Higher Education and Training Minister Buti Manamela confirmed that new systems and reforms are being introduced to prevent future misuse of student funding after more than R1.7 billion in unused and misallocated NSFAS funds was recovered from universities, students and TVET colleges.

The recovered funds form part of more than R2 billion reclaimed by authorities as the 2026 academic year begins, highlighting the scale of financial mismanagement that affected NSFAS between 2016 and 2021. Government officials now say the reforms are designed to restore trust in the student funding system while improving transparency, governance and financial controls.

SIU investigation exposes NSFAS weaknesses

The SIU investigation launched under Proclamation R.88 of 2022 uncovered serious governance failures within NSFAS, including weak financial reconciliation systems and flawed payment structures.

According to Minister Manamela, the investigation identified major vulnerabilities linked to the use of intermediary “solution providers” that handled student allowances and accommodation payments on behalf of NSFAS. The system created opportunities for overcharging, fraud and the exploitation of so-called “ghost beds”, where accommodation providers claimed payments for non-existent students or rooms.

Manamela explained that poor oversight and weak Memoranda of Agreement between NSFAS and institutions contributed significantly to the losses. The SIU investigation has since become one of the largest probes into public education funding mismanagement in South Africa.

More than R1.7 billion recovered

Authorities have already recovered more than R1.7 billion in misused and unallocated funds from universities, students and TVET colleges. The SIU attributed the losses to years of weak internal controls, poor governance and failures in reconciling student funding data.

Officials say the recovery process is continuing as investigators pursue additional funds and examine the involvement of institutions and individuals linked to the irregularities. The recovered money is expected to help strengthen the sustainability of the NSFAS system and support qualifying students in future academic years.

Government introduces major NSFAS reforms

In response to the findings, government has introduced a series of reforms aimed at improving accountability and preventing further abuse of the student funding scheme.

One of the biggest changes involves a new direct payment system for students.

Direct payment model to eliminate intermediaries

Minister Manamela confirmed that from 2026, NSFAS funding allowances and accommodation payments will be made directly to students and accredited accommodation providers.

The move eliminates third-party intermediaries that previously handled payments on behalf of NSFAS. According to government, the direct payment model will reduce opportunities for corruption, overcharging and fraudulent claims.

“NSFAS disburses allowances and accommodation payments directly to students and accredited providers,” Manamela said.

Officials believe the new system will improve transparency while ensuring students receive their funding more efficiently and securely.

Memoranda of Agreement tightened

Government has also introduced stricter Memoranda of Agreement (MOAs) between NSFAS and higher education institutions. The updated agreements place stronger accountability obligations on universities and TVET colleges, including stricter verification of student registration records and improved financial reconciliation procedures.

Institutions will now be required to provide more accurate reporting and tighter controls over student data to prevent incorrect allocations. The reforms are intended to ensure that public funds are used properly and only reach qualifying beneficiaries.

Governance overhaul at NSFAS

Another major reform has been the restructuring of NSFAS leadership and governance structures. Following the SIU findings and recommendations from the Werksmans investigation, the previous NSFAS Board was dissolved and the former CEO’s contract was terminated.

A new Board was appointed in March 2025 with a specific mandate to implement a turnaround strategy focused on restoring financial integrity and strengthening internal controls. Manamela said consequence management against implicated individuals and organisations is ongoing. The minister stressed that accountability remains a priority as authorities continue investigating financial irregularities linked to the scheme.

Higher education demand continues to rise

While government focuses on reforming NSFAS, pressure on South Africa’s higher education system continues to increase.

Thousands of students who achieve bachelor passes and distinctions each year still struggle to secure placement at universities and TVET colleges due to limited space. The issue was raised in Parliament by Al Jama-ah MP Ismail-Moosa, who questioned how government plans to accommodate growing student demand.

New universities planned in Gauteng

In response, Manamela said government is working to expand the post-school education system through the development of new universities. Institutions in Ekurhuleni and Hammanskraal are currently at advanced stages of development and are expected to help increase access to higher education opportunities.

Government believes the expansion of universities will help reduce pressure on existing institutions, particularly in major urban areas where demand remains highest. The new institutions are expected to play an important role in broadening access to tertiary education in future years.

Central Application Service planned

Government is also preparing to introduce a Central Application Service aimed at improving coordination of student placements across institutions.

The system is expected to be presented to Parliament in 2026. According to Manamela, the Central Application Service will simplify the admissions process and improve placement efficiency for students applying to universities and TVET colleges.

The initiative is designed to reduce confusion, duplication and delays that often occur during the admissions process. Officials believe the new system will help students secure placements more fairly and efficiently.

TVET colleges remain key alternative

Government continues to encourage students to consider TVET colleges as an important alternative pathway to university education. Manamela stressed that TVET institutions remain a critical part of South Africa’s post-school education strategy and continue to receive NSFAS support for qualifying students.

TVET colleges provide technical and vocational training aimed at equipping students with practical skills needed in the labour market. Officials say expanding and strengthening TVET education will remain a priority as government attempts to address unemployment and skills shortages.

No plans to fund private institutions

Despite increasing demand for student funding, government says there are currently no plans to extend NSFAS funding to private institutions. Manamela confirmed that the Higher Education Act of 1997 limits NSFAS funding to public higher education institutions only.

“There is no provision for extending NSFAS funding to private institutions,” the minister said.

He explained that any future changes would require legislative amendments as well as a detailed assessment of financial and quality assurance implications. At present, government is focused on stabilising and reforming the existing public funding system rather than expanding support to private colleges and universities.

Restoring public confidence in NSFAS

The recent reforms form part of broader efforts to rebuild public trust in NSFAS following years of controversy and criticism. For many students, NSFAS remains the only opportunity to access higher education and improve their future prospects.

Ensuring that the system operates fairly, transparently and efficiently is therefore considered essential for South Africa’s education sector and economic development. Government hopes the latest reforms will prevent future abuses while ensuring that deserving students continue receiving financial support.

Conclusion

NSFAS overhaul underway after R1.7 billion misallocation marks a major turning point for South Africa’s student funding system. Following the SIU investigation, government has introduced sweeping reforms aimed at improving accountability, eliminating corruption and restoring confidence in NSFAS.

The introduction of direct payments, stricter oversight measures and a new leadership structure represents a significant attempt to close loopholes that previously enabled financial mismanagement.

At the same time, rising demand for higher education continues to place pressure on universities and TVET colleges, forcing government to explore long-term solutions such as new institutions and a Central Application Service. While challenges remain, the reforms announced by Buti Manamela signal a renewed commitment to protecting public funds and ensuring that NSFAS funding reaches the students who need it most.

References from mainstream media

1. Reuters – “South Africa recovers billions in misused NSFAS student funds”
   Reuters NSFAS investigation report
2. IOL – “SIU recovers over R1.7 billion in misallocated NSFAS funds”
   IOL NSFAS recovery article

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