REPORT. African Roads Maintenance Funds Association SADC Focal Group Meeting, 17 th 18 th November Nkopola Lodge Lake Conference Centre
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1 REPORT on African Roads Maintenance Funds Association SADC Focal Group Meeting, 17 th 18 th November 2011 Nkopola Lodge Lake Conference Centre Mangochi Malawi
2 TABLE OF CONTENTS Table of Contents 1 Acronyms Executive Summary.. 3 Introduction Opening Ceremony Country Reports & Discussions Key Resolutions Made Closing Remarks [ARMFA SADC FOCAL GROUP MEETING 2010] Page 1
3 Acronyms ARMFA : African Road Maintenance Funds Association DDF : District Development Fund NRFA : National Road Fund Agency RF : Roads Fund RFA : Roads Funds Administration RUC : Road User Charges SADC : Southern African Development Community ST : Secretary to the Treasury ZINARA : Zimbabwe National Roads Authority [ARMFA SADC FOCAL GROUP MEETING 2010] Page 2
4 1.0 EXECUTIVE SUMMARY The Malawi Roads Fund Administration (RFA) hosted a SADC Focal Group Meeting of the African Road Maintenance Funds Association (ARMFA) in Mangochi from 17 th 18 th November The meeting was attended by 15 delegates from Zambia, Mozambique, Lesotho, Zimbabwe and Malawi. An apology was received from Madagascar. The meeting was opened by Mr Joseph Mwanamvekha, Malawi s Secretary to the Treasury (ST) who was the Guest of Honour. In attendance were the Malawi Roads Fund Administration s secretariat staff and members of the press from the local media houses. The objective of the meeting was to provide all road fund agencies within the Southern African Region with an opportunity to share knowledge and experiences in resource mobilization and road financing. The meeting also served as a forum for road fund agencies in this region to agree on issues to take to the 2011 Annual General Assembly of ARMFA to be held in Catonou, Benin. The meeting agreed to consider the following issues; 1. Review of a report of the 2010 SADC Focal Group Meeting 2. Country Reports and 2012 ARMFA Budget 4. Hosting of the 11 th (2012) ARMFA Annual General Meeting 5. Venue for 2012 SADC Focal Group Meeting 6. Review of the 2010 ARMFA General Assembly Report 7. Issues to be taken to the 10 th ARMFA General Assembly [ARMFA SADC FOCAL GROUP MEETING 2010] Page 3
5 2.0 INTRODUCTION 2.1 ARMFA SADC Focal Groups are an extension of the Executive Committee of ARMFA in their respective geographical areas. They meet at least once before each Annual General Assembly (AGA) to share regional experiences, successes and challenges and also to agree on issues to take to the Annual General Assembly as a group. 2.2 Focal Groups are required to comply with all resolutions and guidelines established by the General Assembly and also with ARMFA bylaws and internal regulations. 2.3 Focal groups freely elect their own office bearers. 2.4 ARMFA has four focal groups, namely the Central Africa Focal Group, the Eastern Africa Focal Group, the Western Africa Focal Group and the SADC Region Focal Group. In all focal groups there is a diversity of languages mostly English, French and Portuguese 2.5 The 2011 SADC Focal Group meeting was held in Malawi s main tourism district of Mangochi from 17 to 18 November [ARMFA SADC FOCAL GROUP MEETING 2010] Page 4
6 3.0 OPENING CEREMONY 3.1 Welcome Remarks by the Chief Executive Officer of the Malawi Roads Fund Administration Mr Hennox Mazengera, the Chief Executive Officer of the Malawi Roads Fund Administration welcomed all members in attendance and introduced the Guest of Honour, Mr Joseph Mwanamvekha, Malawi s Secretary to the Treasury (ST) from the Ministry of Finance and Economic Planning. He went on to express his gratitude to all for their attendance of the meeting to make it a success. He further acknowledged the presence of the Secretary to the Treasury. He then noted an apology from Madagascar and the delayed flight for the Lesotho delegation. He later invited members present to introduce themselves. He concluded by inviting the Chairman of the Focal Group to make his remarks, and thereafter to call upon the Guest of Honour, Mr. Joseph Mwanamvekha, to officially open the meeting. 3.2 Remarks by the Chairman of the Focal Group The SADC Focal Group Chairman, Dr Anthony Mwanaumo, in his introductory remarks emphasized the importance of the meeting as a forum for information sharing and networking and to prepare for the forthcoming Annual General Assembly which was due to be held in Benin from November 29, 2011 December 2, He outlined the key issues at the upcoming general assembly as follows: (a) approval of the 2011 Focal Group Meetings Resolutions; (b) election of the next ARMFA President, (c) ratification of the 2011 Annual Budget; (d) approval of the 2012 Annual Budget (e) selection of the venue for the next ARMFA General Assembly; etc [ARMFA SADC FOCAL GROUP MEETING 2010] Page 5
7 He went on to call upon the Guest of Honour, Mr. Joseph Mwanamvekha, and Secretary to the Treasury (ST) to officially open the meeting. 3.3 Official Opening by the Secretary to the Treasury In his opening speech, the Secretary to the Treasury (ST), Mr. Joseph Mwanamvekha, who was the Guest Honour, noted the country s heavy reliance on road transport, and therefore the impact of the road conditions on the national economy. The ST pointed out that the reforms in the sector, and in particular, the establishment of the RFA had yielded positive results in road financing with visible gains made. He told the meeting that despite the gains, challenges in the sector were still many. He highlighted inadequate funding, high cost of road construction and rehabilitation, and transparency and accountability. He urged delegates, through experience sharing from their countries, to see how to resolve the different challenges. He concluded with a call to the delegates to their core duty as fund managers for the road, and to ensure that they source as much funds as the road may require, and to craft strategies to have it used effectively and efficiently. [ARMFA SADC FOCAL GROUP MEETING 2010] Page 6
8 The Guest of Honour and delegates after opening of the meeting [ARMFA SADC FOCAL GROUP MEETING 2010] Page 7
9 4.0 RECAP OF THE 2010 ARMFA SADC FOCAL GROUP MEETING HELD IN MASERU, LESOTHO 4.1 THE MAIN PURPOSE OF THE MEETING WAS TO: i. Review and discuss individual Country reports from Lesotho, Malawi, Mozambique and Zambia; review the 8th ARMFA General Assembly Report and Workshop of October 12 16, 2009, held in Yaonde, Cameroon; i review the ARMFA Statutes and By Laws; iv. agree on the Themes for the ARMFA Technical Workshop 2010 in Ethiopia; v. review other Pertinent Issues regarding ARMFA generally; vi. review the guidelines on hosting ARMFA Workshop; and v the ARMFA 2009/2010 Budget; and vi the resulting resolutions from this meeting were later submitted and adopted at the 9th General Assembly of ARMFA, Ethiopia on November 1 3, COUNTRY REPORTS AND DISCUSSIONS 5.1 ZIMBABWE Mr. Moses Juma, an engineer at the Zimbabwe National Authority (ZINARA), presented Zimbabwe s country report Vision and Mission Mr Juma presented ZINARA s vision as to become a world class road fund manager, providing secure, stable, and adequate reservoir of funds. ZINARA s mission is to effectively fund maintenance of the national road network through fixing, collection, disbursement and monitoring of funds usage for preservation, enhancement and sustainable development. ZINARA has 12 Board Members and 7 senior managers in 7 departments Road Network [ARMFA SADC FOCAL GROUP MEETING 2010] Page 8
10 The Zimbabwe road network is estimated at 88,000 km. 21% under State through the Department of Roads, 9% under Urban Council and 70% under District Rural Development Fund (DDF) Sources of Funds ZINARA s main sources of revenue include motor vehicle licence fees, fuel levy, toll fees and transit fees which contribute 30%, 28%, 21% and 19% respectively. Toll fees were introduced in 2009 and so far there are 23 tolling points. The system is being computerized to maximize collection fees. There is a project to rehabilitate 820 kilometres of road complete with State of Art Toll Plazas at a cost of 206 million USD under a PPP arrangement with the South Development Bank of Southern Africa (DBSA).Rates of funds collected are as follows: No. Source of Funding US$ 1 Fuel Levy 1c/l for diesel 4c/l for petrol 2 Overload Fees 5c/Kg every 10Km 3 Transit Fees $100 every vehicle 4 Toll Fees $1 - $ Challenges i. Inflation of the currency i iv. Loss in capacity skills Inadequate funds. Construction Companies expertise and equipment turns to be poor. v. Resistance from the public on rise of tariffs [ARMFA SADC FOCAL GROUP MEETING 2010] Page 9
11 5.2 MOZAMBIQUE The Mozambique country report was presented by by Mr. Lazaro Moiane Fund Auditor Budget of 2011 Mr Moiane informed participants that road funds budget for 2011 was USD million which represented a 19% reduction from the previous year. This implied the reduction of activities programmed in the Road Sector Integrated Programme (PRISE) Sources of Funds In Mozambique the major source of the road fund revenues is fuel levy which contributes about 80% followed by transit fees which contribute about 15% of total revenues Challenges i. Funding decresead about 19% compared to i iv. Increased borrowing from commercial banks in order to cover shortfalls in revenue collection avoid delays in projection and interest charges for late payment. Non adjustment of the current fuel levy tax at USD13c per liter which affected the planned revenue Possible underdeclarion of fuel levy payable by petroleum companies. v. Delay in transmitting the fuel levy proceeds by MoF vi. v vi ix. Significant increase on the mantainance costs which created backlog on mantainance Long procurement processes. Delay on the implementation of the mantainance and rehabilitation projects as a result of lack of funds and as a result of the significant increase on the construction costs Delay on the allocation of funds of certain donors [ARMFA SADC FOCAL GROUP MEETING 2010] Page 10
12 5.2.4 Possible Solutions to the challenges i. Reinforce the tax collection mechanisms by improving the established internal control i iv. Continuing on promoting PPP model Identifying new financing opportunities Urging the increase of ceilings of our ordinary development partners [ARMFA SADC FOCAL GROUP MEETING 2010] Page 11
13 5.3 MALAWI Malawi s presentation was made by Mr. Francis Haiya Head of Audit Background The RFA was established by an Act of Parliament in Its main objective is to raise, administer and account for funds for the construction, maintenance and rehabilitation of Malawi s public roads. The operations of the RFA are directed by a Board of seven (7) independent directors Road Network i. The classified road network consists of 15,451 Km (26% are paved and 74% are unpaved) The total network condition is 33% good, 38% fair and 29% poor (June 2009). For paved roads 77%, 21% and 2% are in good, fair and poor conditions, respectively. 10%, 53% and 37% of unpaved roads are in good, fair and poor conditions respectively Transport Sector Investment Programme i. The TSIP is being prepared in phases. Phase I ( ) is at Government approval stage The TSIP establishes criteria for prioritisation of project interventions within/between transport sub-sectors, aligning cost projections to resources availability i The TSIP, once finalised, will inform the establishment of the Medium-Term Expenditure Framework in the transport sector Road Sector Programme i. A 20 year investment plan ( ) aimed at bringing the classified road network into maintainable condition It identifies the resources that need to be mobilised and sets out the funding gaps [ARMFA SADC FOCAL GROUP MEETING 2010] Page 12
14 i It identifies an average annual cost of MK41 billion (US$292 million) for the first 5 years Road Management Responsibilities i. The Roads Authority construction, rehabilitation and maintenance of trunk roads (i.e. main, secondary and tertiary roads) The Local Councils provision and maintenance of roads within areas of their jurisdiction (i.e. district and urban roads) Due to capacity problems, the Roads Authority currently manages, in consultation with the local councils, the district and urban roads Implementing Agencies i. The Roads Authority Construction, rehabilitation and maintenance of public roads i iv. The Road Traffic Directorate Selected traffic management projects The National Road Safety Council of Malawi Selected road safety projects The Local Councils maintenance of community roads Road Fund Revenues i. Parliament appropriations for the purposes of the Roads Fund Roads Fund Fuel Levy i International Transit Fees iv. A percentage of road user charges including taxes, tariffs and tolls v. Loans, grants and donations The road fund fuel levy is by far the most significant, contributing over 90% of total revenues of the Roads Fund. [ARMFA SADC FOCAL GROUP MEETING 2010] Page 13
15 5.3.8 Challenges i. Absence of RFA Board The RFA has been operating without a Board since 4 June Several legal and governance challenges have arisen i iv. Accumulated unpaid fuel levies The RFA has not received fuel levies for the past 6 months. The Roads Fund is experiencing extreme liquidity challenges Resource Constraints The current Roads Fund revenue sources do not meet annual routine and periodic maintenance requirements Deteriorating real value of fuel levy There have been no adjustments in the fuel levy rates since February 2009 v. Dwindling fuel importations Since 2010, low volumes of fuels are being imported into the country. Monthly fuel levy receivables are consequently reducing vi. v vi Escalating commodity prices Commodity prices are on the rise. A marked increase in road construction and maintenance costs is expected Existing huge maintenance backlog The backlog cannot be cleared through road user charges alone. Significant supplementary government and donor support is urgently needed Ineffective utilisation of funds The limited available resources are in some cases not efficiently and effectively used with local authorities. [ARMFA SADC FOCAL GROUP MEETING 2010] Page 14
16 5.4 ZAMBIA The Zambian presentation was made by Mr. Vincent Nyambe Fund Manager Introduction Zambia has a total land area of 752,614 square kilometres and is land linked to eight (8) countries; It has a population of 13 million and an annual population growth rate of 3.2%; About 46% of the population are in urban areas and 54% in rural areas Background i. The Road Sector Reforms in 2002 led to formation of three (3) Agencies, the Road Transport and Safety Agency, Road Development Agency and National Road Fund Agency. The 15 year ( ) Road Sector Investment Programme (ROADSIP) became part of the Road Sector Reforms. i The Country s total road network is 67,671 km of which 40,113 km forms the core road network (CRN) under ROADSIP Road Fund Revenue Sources Local Sources: i. GRZ Treasury i Fuel levy Other Road User charges (ORUC) External Sources: i. AfDB European Union i BADEA/Kuwait Fund iv. Chinese Loans v. DANIDA vi. DBSA v KfW [ARMFA SADC FOCAL GROUP MEETING 2010] Page 15
17 vi ix. Nordic Development Fund NORAD x. OPEC Fund xi. World Bank GRZ Treasury is for road upgrading, new roads and rehabilitation; Fuel levy is for Routine and Periodic Maintenance; and External Funding from Cooperating Partners normally finances Periodic Maintenance and Rehabilitation Challenges Funding issues: i. Limited number of funding sources; i Limited growth in fuel levy due to non regular review; and Inadequate local and external Funding, compounded by generally high unit costs of construction and maintenance. Procurement bottlenecks: Long tendering procedures due to inadequate procurement capacities. Maintenance issues: i. The competing needs of new construction which normally overshadows maintenance; i The ever increasing maintenance costs of the unpaved network; and High maintenance unit cost per kilometre due to limited competition. Contractor capacity issues: i. Lack of implementing capacity by local contractors and councils; and [ARMFA SADC FOCAL GROUP MEETING 2010] Page 16
18 Lack of capacity building strategies for small contractors and councils Sustainability Strategies for Maintenance and Road Safety Funds Funding i. Broadening the revenue base by tolling selected roads; i Revision of the legislation on Fuel Levy and ORUC so that an annual road tax incremental factor can be used regularly; and Sustainability Plan which commences with preparations for the revision of the ROADSIP Bankable Document beyond end of the ROADSIP in Procurement capacities: i. To commence procurement processes immediately after the GRZ approval of each annual budget; and To commence procurement capacity building for Road Sector Agencies and councils through the Road Fund. Maintenance issues: i. Balancing new construction needs with maintenance; i Maintaining the unpaved road network at passable levels at reasonable maintenance costs; and Encouraging competition at all levels to ultimately lower the high construction and maintenance costs. Contractor capacity: i. There is need to immediately build local contractor capacities by: Training of small and medium contractors and councils through the National Council for Construction (NCC); [ARMFA SADC FOCAL GROUP MEETING 2010] Page 17
19 Limiting contractors to manageable number of contracts which can enhance their capacities to complete works within contract time; and Encouraging commercial banks participation in contractor capacity building and undertaking road projects Conclusion i. The intended revision of ROADSIP II will be anchored on Vision 2030; i iv. Political will is high with the new Government s revitalised transformation of the Road Sector; Starting in 2011, funds have been made available before commissioning of projects; However, there is need for more partners in the Road Sector; and v. Zambia has abundant business opportunities for all! [ARMFA SADC FOCAL GROUP MEETING 2010] Page 18
20 5.5 LESOTHO The Lesotho presentation was made by Mr Refiloe Patrick Pule Executive Secretary Lesotho Roads Fund Background i. Lesotho, a country commonly known as the Kingdom in the Sky and a small landlocked country that is completely surrounded by the Republic of South Africa. Lesotho is a mountainous country with the lowlands constituting about one quarter (¼) of the total land area. It boasts of altitudes in excess of 3,000 metres above sea level. It has an area of 30,335km 2 (11,720 square miles). The Kingdom in the Sky enjoys cool to cold and dry winters ranging between C and 12 0 C at times especially in the highlands. Summers are warm to hot and wet with temperatures ranging between 15 o C and 37 o C. i The population of Lesotho was estimated at approximately 1.8 million in 2010 and its distribution pattern is about 2/3 in the lowlands and the rest is either on the foothills or on the highlands Lesotho Road Fund i. The Lesotho Road Fund (RF) was established by a Legal Notice No. 179 dated 7 December Its operations are regulated by Legal Notice No. 72 of The RF is managed by the Road Fund Board (RFB), which is a policy-making body with 3 representatives from the Government of Lesotho and 4 from the private sector. Chairman and Deputy Chairman are from the Private Sector. i The day-to-day administration of the RF is entrusted to the Road Fund Secretariat (RFS) headed by the Executive Secretary. iv. Road Fund has fourteen (14) employees (decreased from 55), all at its Headquarters. [ARMFA SADC FOCAL GROUP MEETING 2010] Page 19
21 5.5.3 Road Fund Mandate i. The primary objective for the establishment of the Road Fund is to provide a mechanism for progressive transformation of the road sector whereby the fiscal burden for the maintenance and rehabilitation of the road network is gradually shifted from the Government to the beneficiaries; namely users of public roads. Therefore the plan of the Government is that in the long run, the road sector will be operated on a fee-for-service basis, requiring road users to pay directly for road maintenance through regular payment of various usage levies, which in turn are channeled to the Road Agencies through the Road Fund Lesotho Road Network i. The total road network of Lesotho is estimated at about 8,900 kms, of which about 1,501 kms is paved, about 4,692kms is gravel and about 2,707 kms is earth or other. i The road maintenance requirements are estimated at US$19.75million. The Road Fund is able to raise US$15million Sources of Funding i. The main sources of revenue for financing road maintenance works are: Road Maintenance Levy on petrol and diesel; Road Toll Gate Fees; and Vehicle License Fees. [ARMFA SADC FOCAL GROUP MEETING 2010] Page 20
22 Implementing Agencies The following are the programme implementing agencies in Lesotho: Roads Directorate (Rural Roads) Roads Directorate (Arterial Roads) Maseru Council Ministry of Local Government Roads Safety Department Toll Fees collection i. Collection of toll-gate fees was enacted by an Act of Parliament in 1976, with the first regulations in the same year. Toll-gates are presently established at nine (9) border posts out of twelve (12) official ones. i Toll-gate fees were originally paid on leaving Lesotho at all border posts. Changes in Toll Fee Collection i. All toll-gates are to be mechanised and manual collections are aimed at being phased out completely by December Toll collections were transferred to the Lesotho Revenue Authority in February i Collections Commission is 12%. iv. Outsourcing of Collections Management has resulted in reduction in operating costs and putting the Lesotho Road Fund at almost 95% towards a fully fledged 3 rd Generation Road Fund, with 14 staff reduced from 55. Impact i. Road toll fees make up about 35% of the Lesotho Road Fund total revenue per annum. Toll-gate fees are second after Road Maintenance Levy (fuel levy). This is as a result of having adjusted toll tariffs by 50% in March All other revenue tariffs remain unadjusted. [ARMFA SADC FOCAL GROUP MEETING 2010] Page 21
23 Future Implementation Studies i. Review and Update of the Study of the Review of the Projected Road Maintenance Needs and Generation of Road Fund Revenue Funded by IDA through ITP. Final Report was Submitted and Recommendations Submitted for Approval by Cabinet. Feasibility of Tolling Certain Corridors in Lesotho Funded by Road Fund. Final Report Submitted and awaiting Board s Approval Challenges i. Delay on the implementation of the road fund projects by the implementing agencies. Non compliance in terms of timely submission of annual programmes and reporting. i These are the inhibiting factors of growth, and we hope to address them with success soon Conclusion The struggle continues and we must ensure that we live a footprint of notably improved, well maintained and safe roads networks in our respective countries. [ARMFA SADC FOCAL GROUP MEETING 2010] Page 22
24 6.0 DISCUSSIONS Member countries made comments and discussed the common challenges and strengths in the regions toward road financing: 6.1 Challenges (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (l) Loss in capacity skill Lack of funding, results in inadequate maintenance activities; Low capacity of the Implementing Agencies, Low capacity of Construction Companies Resistance from the Public on the rise of tariffs Inefficiencies in the collection of funds due to the human element Disbursements from Governments take too long; Long procurement procedures affect projects negatively and cause backlog; Delays in Government s approvals on additional sources of funding Bad weather conditions High cost of road construction (i.e $1m per 1km) High Compensation costs for relocation of Water, Electricity and Telecommunication services 6.2 Solutions (a) (b) (c) (d) Good measures to enforce the Public acceptance Implementation of computerized systems for efficient collection of funds; Implementing Agencies to recruit skilled personnel, Sensitize the Public before change is made on tariffs (e) Lobby through Reporting Ministries and Parliament for Government s approvals; (f) Every country to discuss with implementing agencies and service providers on the high service relocation costs [ARMFA SADC FOCAL GROUP MEETING 2010] Page 23
25 7.0 KEY RESOLUTIONS MADE 7.1 Venue for 2012 SADC Focal Group Meeting It was agreed that the next SADC Focal Group Meeting should take place in Mozambique. The Mozambican delegation promised to confirm after getting the necessary approval from their Board. It was also agreed that the meeting will take place between June and July Hosting of the 2012 ARMFA Annual General Assembly Members agreed to support Zambia to host the 2012 ARMFA Annual General Assembly. 7.3 Issues to Take to the Annual General Assembly Members agreed to take the following issues to the Annual General Assembly: To make the following general comments on the 9 th ARMFA General Assembly Report Quality and presentation style of the Report left room for improvement The Report had a number of typo errors. Members suspected that this could be a translation problem Need to clarify that the rotation of the ARMFA Presidency should be by regions rather than languages and that for 2011 Malawi should be supported as a normal succession plan of ARMFA and also in view of what happened in Yaoundé in Need to seek consensus to remove the age limit for the position of Permanent/Executive Secretary for ARMFA and instead emphasize qualifications in Engineering, Finance and Administration, and experience in road financing or road management. [ARMFA SADC FOCAL GROUP MEETING 2010] Page 24
26 7.3.4 Members reviewed the 2011 Budget, noted shortfalls and agreed to support its ratification at the Annual General Assembly upon getting satisfactory explanations, Clarification should be sought if indeed the Permanent Secretary was working on voluntary basis after he left ARMFA in June Budgets should be approved every year before implementation; Financial Statements should be audited before the Annual General Assembly Members agreed to propose to the Annual General Assembly an increase in the support to the general assembly s hosting country, Need to adjust upwards the ARMFA membership subscription fees, Noted delays in sending invoices for subscription payments and need to send reminders Zambia should host the 2012 ARMFA Annual General Assembly ARMFA should support a comparative study in the SADC Region on the Unit cost of maintenance, rehabilitation and construction of roads; Need to create links between ARMFA and the AU; 7.4 Issues For the SADC Focal Group Members agreed to create greater links between the ARMFA SADC Focal Group and the SADC Secretariat; ARMFA SADC Focal Group members agreed to remit ARMFA Membership subscription fees in time; Malawi was asked to provide a statement of expenses for this meeting to see if ARMFA s financial support is adequate Promote an ARMFA membership drive in the SADC Region to reach out and bring on board more SADC Countries. [ARMFA SADC FOCAL GROUP MEETING 2010] Page 25
27 7.0 CLOSING REMARKS In closing the ARMFA SADC Focal Group chairman thanked all for their active participation to make the meeting a success that it was and appealed to all to ensure they paid their dues to ARMFA. He also thanked Malawi for accepting to host the meeting at short notice. oooo00oooo [ARMFA SADC FOCAL GROUP MEETING 2010] Page 26
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