Blockchain-based financial reporting has potential to empower SMMEs

In South Africa, where economic volatility, high youth unemployment and tightening fiscal space continue to define the national mood, small businesses are often hailed as the engines of inclusive growth. 

But despite their potential, SMMEs (small, medium and micro enterprises) face a host of structural barriers, chief among them is the high cost of compliance. Financial audits, though crucial for credibility, funding and tax alignment, are often prohibitively expensive for small players operating on razor-thin margins.

Enter blockchain-based financial reporting, a digital innovation that promises not only to reduce the costs of auditing but to embed transparency, traceability and trust directly into the architecture of the enterprise itself. For South Africa’s SMMEs and start-ups, this is a structural revolution with real potential to level the financial playing field.

Audits are traditionally backward-looking. Financial statements are compiled, reviewed manually and reconciled, often months after transactions occur. The process is time-consuming, labour-intensive and expensive. For a small business juggling payroll, marketing, operations and growth, a full-scale audit can feel like a detour it cannot afford.

Blockchain challenges this model by creating a continuously updated, decentralised ledger of transactions that is both immutable and accessible in real-time. Once a financial event is recorded, whether it’s a payment, invoice or expense, it is time-stamped, cryptographically secured and visible to relevant parties. 

This system of “trustless” verification can dramatically cut the need for costly manual audits. According to Madzinga and Tinarwo (2023), this architectural shift can significantly reduce audit effort by up to 30% through real-time verification, thereby lowering audit fees and increasing accuracy.

For auditors, this doesn’t spell obsolescence, it marks a reorientation. Auditing becomes a process of overseeing system design, exception reporting and real-time analytics, rather than combing through reams of paperwork to catch historical errors. This aligns with the broader academic consensus that blockchain will shift auditors’ roles toward more analytical and consultative functions.

What makes this shift profound is not just the technical architecture but the access it enables. In today’s economy, formal compliance is often the ticket to growth. Without it, entrepreneurs can’t access bank loans, apply for government tenders or attract investors. Yet, for many SMMEs, especially in townships and rural areas, the cost of accounting services alone keeps them locked out of formal financial channels.

Blockchain-based reporting tools, when integrated with mobile platforms and user-friendly interfaces, can help such businesses create verifiable financial histories automatically, with minimal overhead. Imagine a spaza shop owner generating a blockchain-secured income statement simply by using a mobile point-of-sale device. Or a freelance creative sharing tamperproof payment records with a bank to apply for credit. This is more than digitisation; it is economic inclusion.

South African start-ups, particularly those in tech, logistics and renewable energy, often rely on international investors and accelerators. But cross-border funding comes with strings attached — transparency, traceability and accountability. The traditional approach, hiring auditors, preparing reports, verifying bank statements, is not only slow but often distracts lean teams from their core innovation goals.

With blockchain, start-ups can maintain real-time ledgers visible to investors, regulators  and even customers. By integrating smart contracts and self-executing agreements coded on the blockchain, they can automate not just payments but compliance checks, tax deductions and milestone-based funding disbursements. 

For a Cape Town fintech looking to scale across Africa or a Limpopo agri-tech start-up pitching to a Dutch venture capitalist, this kind of digital credibility could be game-changing. Blockchain holds strong promise for enhancing trust between stakeholders and ensuring tamperproof assurance mechanisms, especially in high-stakes environments.

While the most dramatic benefits are likely to be felt by small businesses, the implications for large firms and public institutions are equally significant. Corporates could streamline internal controls, reduce fraud risk and shorten audit cycles, savings that can be redirected toward innovation, training and social investment. Real-time auditing can also reduce insider risk, particularly in sectors like procurement, mining and construction, where complex supply chains often obscure financial accountability.

In the public sector, blockchain-based reporting could transform how the government tracks budgets, monitors expenditure and audits departments. Although the adoption curve is steeper, the potential is enormous. 

Real-time visibility into departmental spending could not only reduce audit backlogs but offer a bulwark against corruption, something South Africa has learned, painfully, is not a theoretical risk. As identified in the literature, blockchain adoption in the public sector could foster a new era of financial accountability, especially when paired with capacity-building and digital infrastructure investment.

There are secondary gains, too. With integrated tax logic, blockchain systems can automate VAT calculations and submissions. They can allow businesses to access real-time dashboards showing profit margins, tax liabilities and risk exposures. And, as regulatory clarity grows, they can help build investor trust, not just locally, but globally.

Importantly, this is not about surveillance. Data permissions can be managed to protect privacy while still allowing selective transparency for those who need it, be it funders, banks or auditors. South Africa is not short on challenges. But it also isn’t short on creativity, talent and digital capability. The opportunity now is to rethink financial infrastructure, not just as a system for big banks and corporations, but as a shared utility for every entrepreneur, every co-op and every side hustle.

To get there, we need collaboration — from the South African Revenue Service to local fintechs, from regulators to township incubators. We need sandbox testing, education and low-cost blockchain platforms that meet people where they are.

Blockchain-based financial reporting is not a panacea. But it can shift the narrative, from gatekeeping to accessibility, from inefficiency to automation, from distrust to verifiable truth. And in a country where trust is both fragile and vital, that might just be its most powerful feature.

Yonela Faba is a University of Cape Town PhD student and writer with blockchain, finance and policy analysis expertise. He has a background in academia and banking. Linkedin: Yonela Faba.