The student accommodation industry faces rising concerns amid NSFAS uncertainty

The recent assertions by Finance Minister Enoch Godongwana calling for the National Financial Aid Scheme (NSFAS) to be scrapped, coupled with ongoing operational failures, have significantly heightened concerns and uncertainty within the student accommodation industry. 

Earlier this month, Godongwana strongly criticised the NSFAS, saying that if it were up to him, he would even close the institution tomorrow with his "eyes closed.” 

His comments come as the financial aid scheme continues to face reports of mismanagement, said to have severely affected its ability to effectively distribute funds to students. The minister went on to say that the scheme has become an unnecessary intermediary, adding that universities are capable of managing student funding directly.

Impact on the student accommodation industry

This industry is heavily reliant on timely NSFAS payments, says the South African Student Accommodation Providers Association (SASAPA) CEO, Inga Ncomanzi.

She says this instability affects investment in the sector in several critical ways, which include:

• Cash flow risks: Accommodation providers face substantial operational strain and potential insolvency due to payment delays or non-payment from NSFAS.
• Reduced access to capital: Lenders become risk-averse due to the instability, making it difficult for new entrants to secure financing and increasing risk premiums for existing loans.
• Stalled new developments: Investors are likely to defer or cancel new projects, which in turn exacerbates the existing national shortage of student housing.
• Heightened perceived risk: The reliability of NSFAS is now seen as the single biggest risk to the sector's financial viability and investment prospects.

SASAPA's position is clear: the mandate of NSFAS is essential for student access to higher education, but its current implementation is deeply flawed, says Ncomanzi.

“The association believes the problems lie in management and administration, not the core mission, and thus calls for reform over abolition.” 

SASAPA says that if the Minister's suggested model of shutting down NSFAS and having the Department of Higher Education and Training (DHET) pay universities directly were to be implemented, the main problem would be the potential transfer of existing administrative and corruption challenges to the university level.

The organisation, which advocates for fair policies and shared best practices in student accommodation, says key challenges with a university-administered model would include:

• Risk of institutional mismanagement: Past investigations by the Special Investigating Unit (SIU) have revealed significant failures within universities, including poor reconciliation of funds and overpayments to ineligible students. Concerns exist about weakened internal controls in some institutions.
• Inconsistent and inefficient systems: A decentralised model would result in numerous different administrative systems across public universities. This lack of uniformity would create complexity for national accommodation providers and oversight, with no guarantee that universities would be more efficient or timely in their payments than the current NSFAS system.
• Lack of core competency: Universities are primarily educational institutions, and taking on the massive, complex financial aid administration function requires dedicated capacity and specialised systems they may not have.
• Accountability and oversight challenges: Accountability would be fragmented, making it potentially harder for the central government to monitor performance and enforce compliance effectively. This could lead to a less transparent system overall.

Lack of robust oversight

According to SASAPA, the core issue plaguing the sector is a lack of robust oversight, transparency, and accountability across all of the systems implemented so far. It says the consensus among most industry bodies, including SASAPA, is that radical, systemic reform is needed to build a transparent, efficient, and accountable system, regardless of its structure.

Simply moving the payment function does not solve the underlying issues of weak governance, it adds. 

Ncomanzi says SASAPA's advocacy is focused on maintaining NSFAS, but with significant reforms, not its closure. The association argues that the scheme's mandate is essential for the nation's higher education goals.

According to Ncomanzi, NSFAS has played a dual role in the well-being and prospects of SASAPA members. “NSFAS has provided members with access to a massive student population in need of housing, which has been the foundation of their business models and driven growth in the sector.

She says the current state of NSFAS has been a double-edged sword.

“The consistent payment delays, administrative errors, and lack of communication have been the primary source of financial distress, cash flow crises, and operational strain for members, often requiring them to pursue legal action to receive owed funds.” 

Meanwhile, Century 21 says it acknowledges the gravity of Minister Godongwana’s assertion and the deep uncertainty it introduces into the higher education and accommodation landscape, says Anke Nel, the general manager at Century 21 Potchefstroom & Potchefstroom Student Hub.

Not a mere financial mechanism

The real estate company says NSFAS is not just a financial mechanism, but it is the foundation that enables thousands of young South Africans to access education and housing, and in doing so, to shape their futures.

“For the private student accommodation sector, this statement strikes at the heart of stability. If NSFAS funding is withdrawn or significantly altered, it will not only disrupt the lives of students but also unsettle the ecosystem that supports them, which includes property investors, developers, and operators who have built their businesses around providing safe, reliable, and affordable student housing.

Stability in funding structures

Century 21 says it believes that stability in funding structures is not just a business concern; it is a social imperative. “When systems change overnight, students lose homes, owners lose trust, and the purpose of accessible education is undermined.

South Africa’s student accommodation network is vast, vital, and deeply interlinked; and its success depends on a model that values both accountability and continuity.”

Nel says a substantial portion of our residents rely on NSFAS support to access accommodation, which in turn ensures steady occupancy and consistent revenue streams for property owners and investors.

“This financial foundation has enabled us to grow responsibly, reinvest in quality infrastructure, and maintain affordability.” 

While the system has experienced challenges, its structure has provided a degree of predictability and trust that underpins investor confidence, Century 21 says. 

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