ILO Study Urges Stand-Alone Hybrid Structure for Eswatini’s New Unemployment Benefit Fund

The International Labour Organization (ILO), in collaboration with Eswatini’s Ministry of Labour and Social Security and with contributions from the Eswatini National Provident Fund (ENPF) and the Public Service Pension Fund (PSPF), has produced a report as an in-depth assessment of the country’s proposed Unemployment Benefit Fund (UBF). This research provides government and social partners with the technical foundation to design a system that protects workers from job loss, sickness, and maternity-related income shocks while reinforcing broader labour market development. At the heart of the proposal lies a contributory insurance model, financed jointly by employers and employees, that rejects state subsidies and instead relies on its own financial discipline and actuarial integrity.

A New Social Insurance Framework for Eswatini

The UBF is structured as a mandatory social insurance fund covering all workers in the formal sector. Benefits are designed to provide temporary income replacement for up to six months, ensuring that workers who lose their jobs or face illness and maternity interruptions are not left without support. Eligibility criteria are strict: a minimum of 12 months of contributions within the last 18 is required, with a waiting period of seven days before unemployment and sickness benefits can be paid. The benefit design balances adequacy with sustainability; workers receive at least 50 percent of their average wages, while no more than E15,000 per month can be claimed. Financing is based on a total contribution rate of 3.75 percent of wages, split evenly between employer and employee, and distributed across unemployment, sickness, and maternity risks. This clarity of contribution and benefit structure reflects the effort to keep the fund financially independent while establishing trust among participants.

Governance and the Quest for Independence

A major challenge identified by the assessment is governance. Since the UBF will not enjoy fiscal support from the government, its survival depends on strong oversight, transparent accounting, and continuous actuarial evaluations. The draft law creates a tripartite board to manage the fund, with equal representation of government, employers, and workers. This board is expected to report directly to parliament, issue annual reports, and ensure robust internal and external auditing. Transparency is considered non-negotiable, as the credibility of the UBF depends on its ability to demonstrate independence from political interference and financial mismanagement. The report warns that without dedicated governance structures, the fund could easily be overshadowed by competing priorities if it were merged into an existing institution with broader mandates.

ENPF, PSPF, and the Institutional Dilemma

To save costs, government policy initially required the UBF to be hosted by an existing state-owned enterprise. The ENPF and PSPF were evaluated as possible candidates. The ENPF already manages registration of workers and employers and has experience with contribution collection and compliance monitoring, while the PSPF focuses on long-term pension management for public employees. Yet, the analysis shows that neither institution is ideally suited for the UBF’s unique demands. Unemployment insurance is fundamentally different from long-term pension management; it requires rapid claims processing, ongoing compliance inspections, and agile IT systems. A list of 40 core operational tasks, from contribution reconciliation to benefit termination and reserve fund management, highlights the scale of work required. While the ENPF has certain infrastructure in place, both institutions would need significant new capacities, creating the risk of mandate confusion, governance dilution, and inefficiency if the UBF were forced into their frameworks.

The Case for a Hybrid Model

To address this, the ILO proposes an “open hybrid model.” Under this structure, the UBF would be established as a stand-alone, self-sustained state-owned enterprise with its own governance, finances, and reporting systems. However, it would retain the freedom to outsource specific functions to existing institutions where synergies exist. For example, the ENPF could continue to handle registration or contribution collection under contractual agreements, while the UBF board would retain full strategic and financial control. This approach combines the best of two worlds, ensuring independence and accountability while leveraging existing infrastructure to keep costs manageable. International comparisons, such as Denmark’s ATP pension fund, demonstrate that hybrid models can work effectively, but the report stresses that any solution must be tailored to Eswatini’s specific institutional and political context.

Recommendations and the Road Ahead

The study concludes with five key recommendations. First, the UBF should be built as an independent institution with a dedicated governance framework. Second, the open hybrid model should be adopted, allowing outsourcing but preventing dependence on a single external institution. Third, expert workstreams should be launched immediately to refine the law, draft regulations, develop a business plan, and create rules for reserve fund management. Fourth, the rollout should remain modest in ambition to avoid overpromising before capacity has matured. Fifth, the government must strengthen political commitment, expand inter-ministerial collaboration, and integrate unemployment insurance with active labour market policies, ensuring workers are supported not only financially but also through reintegration into the job market.

The roadmap outlined in the report presents a realistic, phased approach. It emphasizes that unemployment insurance cannot be viewed in isolation but must be embedded in a wider social security framework that includes compliance systems, public trust, and transparent governance. The assessment’s ultimate message is clear: the UBF has the potential to transform social protection in Eswatini, but its success hinges on institutional independence, financial sustainability, and strong political will. If implemented with discipline and foresight, the scheme could become a cornerstone of national social security reform, offering protection to vulnerable workers and strengthening economic resilience in an uncertain labour market.