Smart contracts to mitigate late payment in the construction industry in Cape Town

Abstract

The goal of this study was to investigate why smart contracts are not widely used despite their relevance. As documented in the literature, this system built on the blockchain technology has a profound impact on mitigating late payments. The study was inspired by the ongoing problem of late payment, which is a major source of concern for contractors in Cape Town's building industry. A semi-structured questionnaire was used to acquire the relevant data from a sample of twelve participants. The findings of the study indicates that most of the contractors cannot easily switch to smart contracts because they are solely dependent on what their clients provide. In other words, their clients prefer paper-based contracts and therefore the contractors cannot insist on using smart contracts. Also, some of the participants indicated that some of their employees are advanced in age and prefer working with traditional paper contracts, as they are not familiar with the new technology. The findings of this study provide important insights into why smart contracts are not commonly adopted, which might be used to drive future government efforts to enhance operational efficiencies in this sector, as well as for the contractors themselves.