By: Anna Majavu
The government must start using blockchain to minimise corruption in tendering and give SMMEs a fair chance of getting into its procurement supply chains, according to new research. The research by Edzai Kademeteme and Stella Bvuma of the University of Johannesburg said that many departments were still using manual paper-based procurement systems with few electronic features, leaving contracts with SMMEs wide open to human interference and corruption.
Blockchain is a form of smart contracting where a collection of distributed databases that contain all public transactions, records, and digital events are shared among parties to a contract. It involves electronic validation of transactions by algorithms and has electronic time stamps on transactions also linked by mathematical algorithms. Only when all participants in the supply chain agree on the transaction will a new block of information be added to the blockchain. This ensures that only valid transactions are recorded in the blockchain. After a block of data is added to the blockchain, it can no longer be tampered with because it is permanently recorded electronically.
This electronic paper trail makes it nearly impossible for corrupt government officials to create fake invoices, set up payments to ghost companies, or introduce other forms of money laundering into government procurement supply chains. “The use of blockchain will not allow users to tamper with contracts or the data saved into the blockchain,” Kademeteme and Bvuma found.
They said the government needed to introduce blockchain into all procurement processes as soon as possible because its attempt to reduce corruption through regulating procurement and threatening to punish officials had not succeeded in wiping out corruption. “Despite concerted efforts to implement a broad range of anti-corruption measures, the problem of malfeasance persists. Currently, there is no effective evidence-based prevention method to combat and stop corruption when tenders are awarded to SMMEs,” wrote Kademeteme and Bvuma.
Smart contracts that use blockchain technology would eliminate fraud, bureaucracy, and corruption and help the government build trust with the public because it would be seen to be keeping effective records and making information available. “Corruption has caused several economies to crumble and struggle owing to the devastating effect it has on the communities. Once the SA government has implemented blockchain technology, the citizens and SMMEs should be more trustful of the government,” the researchers said. “This should encourage them to transact with the government, as they are guaranteed integrity and the award of tenders that are fair and fraud-free.” Governments in more than 46 countries had already launched 200 blockchain initiatives, they said.