Technological advances provide an impetus to transform and improve land and landed property administration systems, and payment system and processes. Private and governmental stakeholders are involved in property transactions including banks, conveyancers, bridging finance organisations, mortgage originators and estate agents, and all derive payment from property transactions. Payment is the process of transferring money from payer to payee (Kokkola 2010:28), and connects senders and receivers of money (Evans & Abrantes-Metz 2013:52). Incorrect payments or delays in payments may lead to interest claims which may inflate the overall cost (Sharma 2013:781).

Several countries have updated their property systems to electronically record property transaction information and ownership, but the South African system has remained largely paper based. The paper-based transfer of listed shares was dematerialised in a centralised depository thus removing paper share certificates (Aney & Banerji 2015:1). The automated process after dematerialisation resulted in a reduced risk of delayed settlement, enhanced profit, a reduction in processing time, financial savings and higher liquidity (Mistry 2013:2). Aney and Banerji (2015:1) added that dematerialisation reduced the opportunities of forgery, theft and loss of paper share certificates. Moreover, process time is reduced because of a real-time electronic endorsement. The capability for dematerialisation has been in operation in South Africa for several years albeit with only the listed shares (Mistry 2013: 1). The same capability can also be used for the trading of other assets. There are various role-players involved in the end-to-end conveyancing process. Figure 1 provides an illustration of the role-players and the arrows provide an indication of the interaction amongst these role-players.

The private sector that deals with property transactions has enabled electronic processes prior to registration to expedite property transactions and link various role players in the end-to-end property. Many organisations had built businesses around these electronic interchanges. In 2009, Parliament debated the architecture for electronic conveyancing but the infrastructure and capability have still not been put into place. Rajashekhar (2006:13) added a payment mechanism to an e-conveyancing system. Incorrect payments may attract interest claims and security breaches lead to fraud and other risks which will need to be mitigated (Fung, Molico & Stuber 2014:18). In recent times, blockchain technology has emerged as an effective record management system. This article explored the possibility of enhancing the South African property transfer process by introducing blockchain technology to record the ownership of immovable assets. The article builds on the information that was obtained during a doctoral study (Amadi-Echendu 2017).

An exploratory study was conducted in the interpretivistic paradigm that used semi-structured qualitative interviews to explore how the property transfer process in South Africa, the case study environment, can be improved. The population were entities that form part of the end-to-end property transfer process in South Africa. To obtain a national view, organisations that represent major entities involved in the end-to-end property process were interviewed and not individual professionals. Purposive sampling was used to identify the participants from the Banking Association, the Master of the High Court, the Law Society of South Africa, the Pretoria deeds office, the surveyor general office, South Africa’s Central Securities Depository and central collateral platform (Strate Ltd), Tshwane Municipal Council, and the Reserve Bank of South Africa.

Criteria that had to be complied with included that participants needed to have been employed in a managerial position for more than 5 years. Informed consent was obtained from all participants.

Firstly, a desktop literature study was undertaken. There is a general lack of research regarding property related processes in the South African context. Several credible and peer reviewed sources were consulted. Secondly, face-to-face semi-structured interviews were conducted with 19 participants involved in the land registration process in South Africa. The interviews were recorded as an unbiased record of the discussions, thus enhancing the credibility of the study. The interviews were transcribed verbatim and pseudonyms were given to each participant. All identifying information have been removed.

Analysis began directly after completing the first interview (Burnard et al. 2008; Maxwell 2008) to guide subsequent interviews (Corbin & Strauss 1990; Thorne 2000). The interviewer took additional notes during each interview (Doody & Noonan 2013) that were later used to complement the coded data. The transcribed data were analysed by using content analysis. Literature were verified against the interview data. Subthemes were identified which were clustered into main themes. The interpreted information was sent to the participants to validate the interpretations, thus improving the trustworthiness of the research.

The findings are reported based on 19 semi-structured face-to-face interviews that were conducted with stakeholders who are involved in the South African property process, literature that was reviewed, and legislation and documents that were collected during the data collection process. The extracts that relate to the blockchain and distributed ledger from the interviews that were conducted are reflected below. Not all the participants were able to contribute to this topic as not all of the role players are involved with payment instruments. For example, property surveyors that provide valuations of properties did not have knowledge pertaining to irrevocable payments and the blockchain technology.

Michael indicated issues that deal with legislative amendments, strategies to mitigate risk and fraud, and adapting the current structure to make provision for blockchain technology as a trusted recordkeeping system:

George highlighted that blockchain technology and distributed ledgers can record and verify ownership, and the property transfer:

Wendy confirmed that blockchain technology can manage title deeds. She clarified that Bitcoin, a cryptocurrency, is different from blockchain technology and that Rand (the South African fiat currency) can be used instead. The ledger would record the history of every property that is recorded therein:

The implication of using the blockchain technology is that the ownership of each property record will be managed in its own ledger as opposed to being updated in a paper-based title deed. Michael stated that authoritative bodies (the South African Revenue Services [SARS] and SARB) would need to acknowledge and allow digital currencies for large-scale trading to commence in South Africa. The central bank does not regulate cryptocurrencies. Also, the custodianship of the property register would need to be concluded. Michael remarked:

Michael was of the view that in an e-conveyancing scenario that uses blockchain technology, certain functionalities would still need to take place outside the blockchain technology. He opined that the cadastre (up-to-date land information system) would continue to exist and be maintained in parallel with ownership information that may be migrated to blockchain technology:

Lester agreed that blockchain technology can be used effectively to keep accurate records. He was not hopeful of introducing the technology into South Africa over the next few years, but articulated the benefits as follows:

Jerry emphasised the importance of irrevocable payments that must be made as soon as confirmation of the registration has been received:

By implication, the technology which is used need to provide access to all parties to enhance transparency, reduce duplicate verifications and capturing of information, and secure trusted payments in an automated process. Also, the requirement is not for the digitisation of the property process by converting paper information to electronic information through scanning, but the electronic and digital integration of data and verifications in a largely automated system.

All the participants who spoke about blockchain technologies (there were 10) were of the view that blockchain technology would add tremendous value to the property process in South Africa and revolutionise the payment industry with digital contracts that do not require people’s input (Peters & Panayi 2015:2). Smart contracts can automate the payments process thus restructuring the entire process (Warren et al. 2019). Blockchain is an ideal technology to manage contractual relationships and value exchanges (Carson et al. 2018). President Ramaphosa signed the Electronic Deeds Registration Systems Bill into law on 02 October 2019 to implement a South African electronic deeds registration system. The architectural design is yet to be made known.

Traditionally banks, especially the central bank has been at the heart of all financial transactions in South Africa. In the current process, the transferring attorney instructs the bank to effect certain payments against pre-issued guarantees. Payments are revocable and can therefore be reversed which challenges the payment security. The fundamental concept of dematerialisation is that ownership deems to be transferred the moment the payment has been made for the asset, the so-called ‘payment versus delivery’ concept. Irrevocable payment made via trusted parties is crucial to protect property ownership rights.

The blockchain technology on the other hand, has largely been used for the mining of cryptocurrencies and has used the decentralised distributed ledger where transactions cannot be reversed. The technology is also a peer-to-peer process that excludes banks and the central bank. With no one entity being in control of the system, the system is also more resilient to cyber-attacks, although the anonymous nature of transactions on the blockchain could allow criminals to launder money through this system. Blockchain technology as a shared system in a supply chain may help to remove bottlenecks and compel supply chain partners to acquire updated technology to remain part of the supply chain and enhance overall competitiveness (Warren et al. 2019).

Cryptocurrencies can be separated from the blockchain technology. The SARB has shown interest in a national digital currency (e-NCA 2017). Various South African financial industry entities including banks, SARB, the Financial Services Board, the Payments Association of South Africa and Strate successfully processed an asset swap via the blockchain technology in October 2016 as a pilot project (Naidoo 2016). It is uncertain as to which entity need to house these technologies at this point. It is also unclear whether blockchain technologies will be used with fiat or virtual currencies. By allowing the central bank access to the blockchain platform to monitor property transactions, one may argue that another centralised power structure is being created which opposes the distributed ledger notion. The argument may be that the whole point of blockchain technology is to decentralise the ownership process.

The deeds office as a government agency currently oversees and manages the property register as a custodian. They fulfil various steps to ensure that the integrity of the South African property register is kept intact, thus protecting owners’ property rights. Discrepancies, irregularities and incorrect information negatively affect the trustworthiness of the property register which may lead to the introduction of title insurance to protect ownership titles (Velencoso & Luz 2013:173).

Recording information without verification may reduce processing time, but in turn may negatively affect titles and rights of immovable property. When reengineering a property registration system, the security of title with corresponding compliance to legal requirements must be considered (Sandberg 2010:111). Custodianship would still need to vest with the deeds office so that the integrity of the property register may continue.

Cross border transactions in cryptocurrency do not require tax payments and can be detrimental to a country’s economy. Taxes payable to municipalities are determined by the valuation of the property and are applied towards infrastructural development and maintenance. Many of the participants pointed out that blockchain technology can be used with fiat currency instead of cryptocurrencies. As demonstrated by the South African pilot in 2016, banks and central banks can be involved in the new process that uses blockchain technologies. Property contributes substantially to the South African economy, it is therefore imperative that the accuracy and security of the property register is kept intact.

There is a need to move away from paper-based property transactions by using newer technology like the blockchain. The option for blockchain technology to work with fiat currency should be acknowledged. Although legislation has been updated to accommodate electronic and paperless transactions for property registrations in South Africa, not much has changed in this space.

Irrevocable payments should be made on receipt of an irrevocable registration confirmation from the deeds office. This is not currently the case; this article therefore explored the introduction of blockchain technologies into the property sector to integrate the electronic records management with the process of managing payments. Despite the many fears of fraud and money laundering, the technology provides a platform to accurately manage the ownership of individual assets. Blockchain technology may employ local fiat currency instead of cryptocurrencies.

Whilst blockchain technologies decentralise transactions, there is a need to include the central bank and deeds office into the process to ensure that taxes are correctly paid and to keep the integrity of the property register intact. It is recommended that the SARB and the deeds office should remain in control of the blockchain technology, if adopted. The introduction of KYC principles will ensure that transactions are not anonymous, and the proceeds of all funds will be traceable and linked to specific entities. This will result in cost and time benefits for all stakeholders involved in the property process. It is further recommended that an irrevocable payment system should be linked to this technology. Future study may investigate the regulation of cryptocurrencies and the resultant relationship with market forces. The legislative framework would need to be adapted to incorporate dematerialisation and blockchain technology.