The technology’s unalterable digital trail would reduce fiscal leaks and prevent large-scale corruption draining the public purse. Photo: Supplied
The recent revelation that R240 million was siphoned from the South African Social Security Agency (Sassa) by its own employees has once again exposed the vulnerabilities in the country’s public finance systems.
At the same time, reports indicate that R318 million has been recovered from law firms that defrauded the Road Accident Fund (RAF), highlighting the extent to which fraud drains public funds meant to assist vulnerable citizens.
These cases are part of a larger pattern of financial mismanagement and corruption that continues to plague state institutions. Without significant reforms, these fiscal leaks will persist, eroding public trust and diverting resources from those who need them most.
Blockchain technology offers a solution that could prevent such fraudulent activities by ensuring an incorruptible, transparent and traceable record of financial transactions. Unlike traditional financial systems, which rely on centralised databases that those with access can manipulate, blockchain operates as a decentralised ledger where every transaction is permanently recorded and cannot be altered without detection. This would make it significantly harder for corrupt individuals to siphon off public funds, as every transaction would leave an unalterable digital trail.
A key feature of blockchain is its append-only structure, meaning that, once a transaction is recorded, it cannot be deleted or modified without generating a transparent log of the attempted change.
In the case of Sassa, every social grant payment would have been logged on an immutable ledger, allowing authorities to track the movement of funds in real time. Any attempt to redirect or duplicate payments would have been flagged immediately, making it easy to identify fraudulent activities and their perpetrators.
Similarly, in the RAF case, fraudulent claims submitted by law firms could have been cross-checked against an immutable blockchain database, ensuring that only legitimate claims were processed and paid out.
Beyond transparency, blockchain technology could incorporate smart contracts to enforce strict payment rules. These self-executing digital contracts would ensure that funds are only disbursed when specific, verifiable conditions are met.
For instance, social grants could be linked to biometric verification of recipients, preventing unauthorised third-party access to funds. In the case of RAF claims, payments could be released only after automated checks confirm that all necessary documentation has been submitted and verified against blockchain records, preventing fraudulent legal claims.
By removing human discretion from key financial processes, smart contracts would eliminate opportunities for manual tampering and unauthorised transactions.
South Africa is already exploring blockchain technology through the South African Reserve Bank’s Project Khokha, which tests blockchain-based payment systems. Expanding this initiative beyond financial institutions and into public sector payment systems would be a logical next step.
Blockchain could be used to secure Sassa payments and RAF claims, eliminate ghost employees in government payrolls, ensure transparency in public procurement and track healthcare funding. Since blockchain-based financial infrastructure is already being developed and tested, implementing it across government systems would not require building a new system from scratch but rather modifying and expanding existing frameworks.
Instead of developing separate blockchain networks for different government agencies, South Africa could establish a national blockchain infrastructure with sector-specific sub-blockchains. This would allow for real-time verification of government transactions across departments, ensuring that funds are not fraudulently duplicated or misallocated. By integrating blockchain technology across public finance systems, South Africa could significantly reduce fiscal leaks and prevent large-scale corruption.
One concern often raised about blockchain adoption is its energy consumption, particularly in systems that rely on proof-of-work mining. But a government blockchain system would not require such an energy-intensive approach. The system could remain secure while operating with minimal energy consumption by using proof-of-authority or other efficient consensus mechanisms. In addition, renewable energy sources could be used to power blockchain-based government services, aligning with South Africa’s broader sustainability goals.
The fraud cases involving Sassa and RAF are not isolated incidents but symptoms of a broader systemic failure in financial oversight and accountability. The same weaknesses have allowed ghost employees to persist in the public sector payroll, where non-existent workers continue to receive salaries at the taxpayer’s expense.
Similarly, the National Student Financial Aid Scheme (NSFAS) has struggled with ghost beneficiaries — students who either do not exist or do not qualify but still receive funding. These schemes are bleeding millions from the public purse and conventional auditing methods have failed to curb the abuse.
Blockchain offers a way to move beyond reactive responses and instead build a system where large-scale fraud is structurally impossible. With its ability to provide real-time verification of transactions, biometric-linked payments and tamper-proof records, blockchain could be a powerful tool in eliminating ghost employees, fraudulent legal claims and unauthorised grant or student aid payments.
The technology is already here and the infrastructure is already being tested. If the Reserve Bank can integrate blockchain into its financial systems, there is no reason why government agencies like Sassa, RAF and NSFAS cannot follow suit. Implementing blockchain in public finance systems is no longer a question of feasibility; it is a necessity for ensuring transparency, accountability and the protection of public funds.
Yonela Faba is a PhD student and writer with blockchain, finance and policy analysis expertise. He has a background in academia and banking. Connect on Linkedin: Yonela Faba.
