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2016

June 2016

16 June 2016

All round applause for new Central Bank of Nigeria forex policy

By John Omachoonu | BusinessDay, Nigeria June 16, 2016

Analysts and investors yesterday cheered the new foreign exchange market unveiled by the Central Bank of Nigeria (CBN), as stocks rose and bond yields fell.

Godwin Emefiele , governor of the CBN announced that the bank would begin market-driven foreign currency trading next week, abandoning its 16-month fixed exchange rate policy.

With a likely sharp fall for the naira, Nigerian products will become relatively cheap and imports more expensive, which should stimulate the domestic economy.

“To improve the dynamics of the market, we will introduce foreign exchange primary dealers who would be registered by the CBN to deal directly with the bank for large trade sizes on a two-way quote basis,” Emefiele told reporters.

Nigeria’s stock market gained 3 percent following the announcement, while yields on 5 year and 20 year bonds fell.

“This is positive for growth as accessibility to dollars will improve; hence manufacturers can source dollars to import raw material input. I expect growth to steadily improve in the coming quarters, especially from the manufacturing sector,” said Tosin Ojo, head of research at investment firm, Cardinal Stone, in response to questions.

“This new system is more transparent than what we had before (prior to the elimination of two way quote) – hence it will significantly raise the confidence of foreign investors, especially if the auctions go smoothly and backlogs are successfully cleared.”

The CBN said eight to 10 primary dealers would supply the interbank market with dollars, handling minimum volumes of $10 million.

The primary dealers will be allowed to sell back 70 percent of any dollars bought from the Central Bank on the day of purchase. Sales must be backed by a specific customer order to avoid currency speculation, the Central Bank said.

Nigeria’s retail currency operators or bureaux de change will not be able to buy from the interbank market.

The CBN expects to notify selected primary dealers by Friday 17th of June.

Robert Omotunde, acting Head Afrinvest Research said, “We have always been clear about our position on the acceptable exchange rate regime that will eliminate sharp practices and guarantee market efficiency. The solution is a market driven exchange rate mechanism. The first thing for the CBN is to determine if it currently has FX reserves buffer to shoulder huge demand within the system. This thus implies that a market driven exchange rate will even assist the CBN in meeting some of the demands within the system.”

Nigeria has been dealing with the effects of three significant and simultaneous global shocks, which began around the third quarter of 2014, including the over 70 percent drop in the price of crude oil, global growth slowdown and geopolitical tensions along critical trading routes in the world; and normalisation of monetary policy by the United States’ Federal Reserve.

In view of these headwinds, its Foreign Exchange Reserves declined significantly from about $42.8 billion in January 2014 to about $26.7 billion as of 10th June 2016.

In terms of inflows, the CBN foreign exchange earnings have fallen from about $3.2 billion monthly to current levels of below a billion dollars per month.

Razia Khan, chief Africa economist at Standard Chartered Bank, London, regarded the announcement as broadly positive.

Analysts say the CBNs move adds to far-reaching policy shifts in a series of more ‘market friendly’ decisions by the Buhari administration in recent months, including the scrapping of fuel subsidies and reaching a compromise with MTN on a $1.7 billion fine.

“This indicates that reform-oriented officials like Vice President Yemi Osinbajo and Finance Minister Kemi Adeosun (both advocates of exchange rate flexibility) are beginning to make an impact,”Philippe de Pontet Practice Head, Sub-Saharan Africa at Eurasia group said.

Emefiele also said the Central Bank would open a foreign exchange the futures market to ease demand on spot trading, reduce volatility and give businesses the opportunity to hedge risks.

Africa’s biggest economy, which contracted by 0.4 percent in the first quarter, faces its worst crisis in decades after the decline in oil prices and last year’s introduction of a currency peg that prompted a large-scale capital flight.

“We believe these measures are long overdue while some of the innovations introduced to the forex market today will not only ensure liquidity and access to foreign exchange but will also deepen the Nigerian financial market. Without a doubt, the policy will remove uncertainty and lure back the inflow of foreign investments into the Nigerian economy,”Ogho Okiti

CEO of consulting firm, Time Economics, said.

Emefiele assured that Nigeria’s $27 billion foreign reserves were capable of meeting all pent up demand and therefore that there was no need for the market to panic.

To enhance liquidity, the CBN plans to offer long-tenured FX Forwards of between 6-12 month to authorised dealers while unlike before where proceeds of foreign investment flows and remittances go to the CBN, inflows will now be warehoused and sold to Primary Dealers in the market using the daily Inter-Bank Rate.

Furthermore, non-oil exporters are now allowed unfettered access to their FX proceeds, which would be sold in the Inter-bank market.

Proceeds of Foreign Investment Inflows and International Money Transfers would also be purchased by Authorised Dealers at the Daily Inter-Bank Rate; and non-oil exporters.

Bukar Kyari, Chairman, Nigeria Economic Summit Group (NESG), welcomed the CBN move, calling it an “effort to turn Nigeria into an inward looking economy. This is what we need if we want to truly promote growth in local production,” Kyari said after the announcement.

2016

June 2016

15 June 2016

Zimbabwe cuts bank charges in push for electronic payments amid cash crisis

By Staff Writer | The Source Zimbabwe June 15, 2016

Charges for electronic payments have been cut after an agreement between the Reserve Bank of Zimbabwe, banks and providers of payment platforms, the central bank announced on Tuesday.

RBZ announced it had reached an agreement with banks and service providers to cut fees “in order to promote and encourage the use of electronic bank services”.

RTGS transfers will now cost $5, down from $10 per transaction. Point-of-sale (POS) transactions of up to $10 will cost 10 cents, while a POS transaction of above $10 will be charged a maximum of 45 cents. If a customer uses a POS from their own bank, they will be charged 20 cents. ATM charges, which varied between banks previously, will now cost a maximum $2.50. Monthly administration or service fees are set at a maximum of $5.

Reserve Bank of Zimbabwe (RBZ) has been battling to increase the use of bank cards and other electronic payment systems as part of its efforts to respond to a deepening cash crisis. However, high charges levied by banks have seen the public stay away from plastic money, preferring cash, which is now in short supply.

“It is envisaged that the reduction in transactional fees will go a long way in promoting the plastic money which is essential to move the economy towards a cashless society and to complement the current financial inclusion efforts,” the central bank said.

Banks have been reluctant to cut back on fees and charges, which now account for a large part of their earnings as banks pare down their core business of lending due to the rising risk of default.

A 2015 survey by FinTrust, which analyses banking trends in Africa, found that 70 percent of Zimbabwean adults do not have a bank account. Of the five million adults that are not banked, 74 percent percent said they do not have the money to save, 28 percent said they could not maintain the required minimum balances, while seven percent cited high bank charges.

Mobile money is now the largest mover of transactions in the economy, with RBZ stats showing it accounts for 89 percent of the number of transactions in the economy.

According to the latest available data, $402 million worth of retail transactions went through POS systems in the quarter to December 2015, compared to $420 million in the same quarter of 2014. As at December 2015, Zimbabwe had 16,363 POS terminals in use, and 556 ATMs.

At the close of 2015, there were 2,365,160 debit cards in issue in Zimbabwe against 3,613,781 in December 2014.

2016

June 2016

14 June 2016

MTN Nigeria to pay record fine over three years

By Staff Writer | IT News Africa June 14, 2016

The landmark fine signalled a change of stance towards the private sector in Nigeria.

Gallo Images

MTN Nigeria has revealed that it has reached an agreement with the government of Nigeria rergarding its record fine.

The operator revealed in a media statement that it has agreed to pay a total cash amount of Naira 330 billion over three years.

According to MTN, the Naira 50 billion paid in good faith and without prejudice by MTN Nigeria on 24 February 2016 forms part of the monetary component of the settlement leaving a balance of Naira 280 billion outstanding which will be discharged as follows:

Naira 30 billion on 8 July 2016
Naira 30 billion on 31 March 2017
Naira 55 billion on 31 March 2018
Naira 55 billion on 31 December 2018
Naira 55 billion on 31 March 2019
Naira 55 billion on 31 May 2019

In addition to the monetary settlement set out above:

– MTN Nigeria subscribes to the voluntary observance of the Code of Corporate Governance for the Telecommunications Industry and will ensure compulsory compliance when the said Code is made mandatory for the Telecommunications Industry.

– MTN Nigeria undertakes to take immediate steps to ensure the listing of its shares on the Nigerian Stock Exchange as soon as commercially and legally possible after the date of execution of the settlement agreement;

– MTN Nigeria shall always ensure full compliance with its license terms and conditions as issued by Nigerian Communication Commission (“NCC”).

MTN Group Executive Chairman Phuthuma Nhleko said: “he expresses his thanks and gratitude to the FGN for the spirit in which the matter was resolved and believes this is the best outcome for the Company, its stakeholders, the FGN and the Nigerian people and that the relationship between MTN, the FGN and the NCC has been restored and strengthened”.

Full article available here.

14 June 2016

Eritrea accuses Ethiopia of launching border attack

By Staff | The Citizen, Tanzania June 14, 2016

Eritrea on Monday accused arch-rival Ethiopia of attacking its heavily militarised border, but officials in Addis Ababa said they had no knowledge of the reported fighting.

Ethiopia on Sunday “unleashed an attack against Eritrea on the Tsorona Central Front,” Eritrea’s ministry of information said in a statement.
Ethiopian government spokesman Getachew Redda said there were “no clashes that we know of”.

Eritrea won independence from Ethiopia in 1991 after three decades of war, but returned to battle in 1998-2000.

They remain bitter enemies, with their troops still eyeing each other along the fortified frontier. Tensions are never far from the surface.

“The purpose and ramifications of this attack are not clear,” Eritrea said, adding it “will issue further statements on the unfolding situation.”

Eritrea and Ethiopia have long traded accusations of attacks and of backing rebels to needle each other.

In March 2012, Ethiopia attacked an Eritrean military base, accusing the country of supporting “terrorist activities” on its territory.

In February, Ethiopia accused Eritrea of being behind anti-government protests in the Oromia region last year which led to a violent clampdown by the government in Addis Ababa.

The two countries remain at odds over the flashpoint town of Badme, awarded to Eritrea by a United Nations-backed boundary commission but still controlled by Ethiopia.

It was not immediately possible to verify the reports of clashes independently. Eritrea’s media is ranked below North Korea as worst in the world for press freedom by Reporters Without Borders.

However, opposition Eritrean websites, run from abroad but with contacts inside the country, reported there were clashes along the border, but said they had no indication if there had been casualties.

“Yet another Eritrea-Ethiopia military clash,” the Awate.com website reported, while noting that it is rare for Eritrea to directly accuse Ethiopia of military attacks.

“The clash occurred shortly after midnight on Sunday morning and each side appears to be calling up reinforcement,” Awate said.

The Asmarino website carried a statement from opposition campaigners appealing for calm.

“The prospect of another war is inconceivable,” the statement read.

Thousands of Eritreans risk their lives to flee the hardline regime every month according to the UN, fleeing across the border into Sudan and Ethiopia despite a shoot-to-kill policy along the frontier.

14 June 2016

Niger Delta Avengers says ready for dialogue with Nigeria

By Staff | BusinessDay, Nigeria June 14, 2016

The militant group which calls itself  the Niger Delta Avengers (NDA) and has been blowing up oil installations in Nigeria’s Niger Delta of recent, says it is ready to dialogue with government under certain terms and conditions.

The group said in a statement yesterday that it  wants a “genuine attitude and conducive atmosphere that will make us commit to any proposed dialogue”.

It further says that it wants  the Federal Government to arrange for representatives of the countries of origin of multinational oil companies operating in Nigeria to act as independent mediators in the talks  and that it  believes that it is only in such an environment that  a framework for achieving its  demands can be met and that this will lead to lasting peace.

It adds, “The NDA high command is restating our commitment to attack the interest of oil corporation and international refineries operators that bring in vessels to the Niger delta territory to buy our oil that every successive government have (sic) refused to used and reapply the proceeds towards any development in the region since 1958.”

The NDA warns that “during this period of ‘Operation Red Economy’, until and/or after the dialogue”, no attempt should be made to repair pipelines and other oil and gas facilities damaged by its operatives, otherwise it would destroy two petroleum bearing vessels as a warning.

The message further reads, “The issues of the Niger delta are as old and as new as the days of Pa. Dappa Biriye, Major Jasper Isaac Adaka Boro, to Ken Saro Wiwa and the government of President Musa Yar’ Adua. We are warning this government of President Muhammadu Buhari, not to turn the essence of genuine peace talk and dialogue to political jamboree that is prevailing now where all manner of social media agitators and criminals have being sponsored by the job seeking corrupt political class to safe faces (sic) before the government of the day.”

It further states that it could resort to taking lives if the trade in crude oil from the Niger Delta region is not suspended for now.

The NDA had earlier made demands including the immediate implementation of the 2014 National Conference report and that President Buhari, the director-general of the State Secret Services and the All Progressives Congress (APC) candidate in Bayelsa State, Timipre Sylva, should apologise to the people of the Niger Delta region and family of the late  DSP Alamieyeseigha, for killing him with intimidation and harassment because of his party affiliations.

It also asserts that the ownership of oil blocs in Nigeria must reflect 60% for the oil producing people and 40% for the non-oil producing people.

It also says that Ogoniland and all oil-polluted lands in the Niger Delta must be cleaned up, while compensation should be paid to all oil-producing communities and that Radio Biafra director and Independent(sic) Indigenous Peoples of Biafra leader, Nnamdi Kanu, should be released unconditionally, while  the Niger Delta Amnesty Programme must be well funded and allowed to continue to run effectively.

It further demands that “all APC members indicted for corruption should be made to face trial like their counterparts in the Peoples Democratic Party.”

2016

June 2016

13 June 2016

Asoko Sector Brief – Kenya Agriculture/Livestock Q2 2016

By Staff Writer | Asoko Insight June 13, 2016

Rukinga Wildlife Ranch in Maungu, Kenya.

AFP

State-owned meat processing company the Kenya Meat Commission (KMC) in April concluded an agreement with Cemsan Makina, a Turkish company, for a technical audit of its two abattoirs, as part of wider plans for an $10.9 million upgrade of its facilities recommended by the National Assembly’s Public Investment Committee (PIC) in January.

The modernization plans represent welcome new investment for the firm, which has been struggling since it reopened in 2006, 15 years after it was closed due to what local media described as theft and mismanagement; the firm reportedly experiences frequent breakdowns of its mostly old machinery and is currently operating at around just 30% capacity. Improved performance could pave the way for its eventual privatisation, which the PIC also recommended.

KMC is the largest of only a handful of well-established licensed meat exporters in the country, alongside Quality Meat Packers andFarmers’ Choice, who are among the larger privately-owned slaughterhouses. The former produces primarily beef, lamb and poultry products, while the latter specialises in pork products, alongside beef and lamb.

However the sector is expanding with new players, including Neema Slaughterhouses, who opened an $2.9 million abattoir in April last year. Construction of the facility, which is located in the Lucky Summer area of Nairobi and has the capacity to slaughter 9000 smaller animals and 900 larger animals a day, was funded by 3000 small-scale pastoralists. Another $3.5 million facility, owned by Livestock Slaughtering Company, entered into operation in the capital in October. The government is also building four new exporting abattoirs in various parts of the country, three of which are reportedly close to completion.

The rapid expansion is part of a larger push by Kenya to boost revenues from sales of animal products to its main meat export markets – principally the Middle East, and East and Central Africa.

The authorities are also seeking to eventually gain a foothold in other major markets abroad such as Europe. Kenyan beef exports to the EU, for which the country previously had a quota of 4000 tonnes a year, have been banned since 2008 due to factors including the failure to control certain livestock diseases and a lack of adequate inspection infrastructure.

The EU in September granted Kenya $13.8 million to improve inspection facilities, and the authorities early this year also announced a new foot-and-mouth disease vaccination initiative that they hope could help lead to a lifting of the ban. While such efforts remain in their infancy, developing exports could have important knock-on effects for the wider economy given the large importance of the livestock industry, which accounts for around a tenth of GDP and a third of employment.

www.asokoinsight.com – Africa corporate data

2016

June 2016

09 June 2016

Private equity deals in East Africa up 50% but value lags behind

By Charles Mwaniki | Business Daily, KenyaJune 9, 2016                                                                                                                                            

A trader in a Rwandan leather market.

AFP

The number of private equity deals in East Africa rose 50 per cent in the first four months of 2015 compared to the same period last year even as the value of transactions failed to match last year’s numbers, according to newly released data.

Burbidge Capital says that the region completed 19 PE deals in 2016 compared to 12 in the four months to April 2015.

The value of deals, however, fell substantially to Sh12.4 billion ($123 million) compared to Sh73.5 billion ($728 million) by April 2015.

Last year’s deal pipeline benefited from big ticket deals such as Helios Partners’ exit fromEquity Bank that earned the British PE firm Sh50 billion, and Old Mutual’s Sh15.7 billion purchase of a stake in UAP from PE firms Abraaj Group, AfricInvest and Swedfund.

“In private equity, seven investment deals in April (19 deals year to date) were announced in the banking (two), IT, online lending, logistics and manufacturing sectors in Kenya and in the agribusiness sector in Ethiopia,” said Burbidge Capital in their East African financial review for April.

“In mergers and acquisition it was all a Kenyan affair with six deals (15 deals year to date) being recorded in the insurance, beauty, e-commerce, hospitality, beverage and logistics sectors. One joint venture was witnessed in the hospitality sector in Kenya.”

In April, the UK development finance institution CDC Group announced it had bought a 10.68 per cent stake in Kenyan tier II bank I&M Holdings from Germany’s DEG and Proparco of France.

Other significant PE deals in Kenya this year include the Sh2 billion investment inTransCentury by New York-based Kuramo Capital Management in March, which went towards settling the listed firm’s obligation to its convertible bond investors.

Also in March, third tier Fidelity Commercial Bank said it had agreed to sell an equity stake to UK PE firm Duet Group for Sh1.9 billion, doubling the bank’s core capital base to more than Sh3.8 billion.

According to Cytonn Investments, PE investment in Kenya is likely to see an upward surge in the rest of the year, as foreign investors are attracted by higher returns on offer compared to global averages.

“Financial services, energy, healthcare, education and IT continue to be the main sectors attracting private equity activity with infrastructure, real estate, and natural resources gaining ground.

“We remain bullish on PE as an asset class given the rapidly increasing demand driven by the rising middle-income class in Africa, attractive valuations in the private sector, and better rates of return to investors with higher economic growth projections compared to global markets,” said Cytonn in their May 2016 markets summary.

For mergers and acquisitions, this year has seen 15 deals valued at Sh21.2 billion in the region, compared to 13 deals valued at Sh33 billion recorded in the four months to April 2015.

There have only been two joint venture investments , one corporate bond and two private share placements this year, all valued at Sh8.7 billion ($86 million).

2016

June 2016

08 June 2016

Africa’s mining industry lost $27 billion last year

By Staff Writer | Nairametrics June 8, 2016                                                                                                                                                                      

Striking platinum miners gather at the Wonderkop Stadium in Marikana, South Africa.

AFP

According to PwC, the top 40 miners in Africa recorded a collective loss in market capitalization of about $27 billion as investors turn away from sector.

Among the reasons are poor investment, capital management decisions, and in some quarters for squandering the benefits of the boom. The mining industry has been in a commodity down turn for the past three years after enduring years of boom when market prices were high.

The Buhari Administration has outlined its plans to jump-start Nigeria’s mining revolution and may want to draw from the conclusion of this report to ensure the industry attracts investors money. Here is an excerpt of the report;

The 13th in PwC’s industry series analysing financial performance and global trends, the report reveals a first ever collective net loss (US$27bn) for the Top 40 miners with market capitalisation falling by 37%, effectively wiping out all the gains made during the commodity super cycle.

Michal Kotzé, Mining Industry Leader for PwC Africa, says: “Last year was undoubtedly challenging for the mining sector. The Top 40 experienced their first ever collective net loss, their lowest return on capital employed, a significant drop in market capitalisation, and an overall decline in liquidity with the result that the Top 40 were more vulnerable and carrying heavier debt loads than in prior years.”

“We are also seeing shareholders persist with a short term focus, impacting the capital available for investment and, as a result, constraining options for growth.

“But this is a hardy industry, and while many miners may be down they are certainly not out.”

Mine 2016 also found:

> Investors punished the Top 40 for poor investment and capital management decisions, and in some quarters for squandering the benefits of the boom.

> Concerns over the ‘spot mentality’ from shareholders focused on fluctuating commodities prices and short term returns rather than the long term investment horizon required in mining.

> A focus on maximising value from shedding assets as well as mothballing marginal projects or curtailing capacity by Top 40 minters. This is further evidenced by a significant drop off in capex signaling an almost stagnant investment environment.

> A positive focus on cost reduction resulting in a 17% drop in operating costs against a backdrop of higher production volumes and lower input costs – an impressive achievement given the production increases seen during 2015.

2016

June 2016

07 June 2016

Excitement as Equatorial Guinea begins oil and gas licensing round

 

 

Equatorial Guinea's oil and gas sector is thought to hold promising prospects.

Getty Images

On Monday, Equatorial Guinea’s Ministry of Mines, Industry and Energy (MMIE) officially launched the country’s latest oil and gas blocks licensing round, EG Ronda 2016.

Companies are now able to submit letters of interest to the ministry, and to view the official map of available blocks.

The announcement, which was made at an industry conference in Cape Town, is part of a four city promotional tour that will commence in London, followed by Singapore, Istanbul and finally ending off in Texas Houston.

Public promotion of the bidding round, which calls for expression of interest on 37 open licenses, of which 32 are offshore, will commence on 20 June and conclude on 30 November, 2016.

Oil and gas exploration has high potential

The MMIE intends to build upon Equatorial Guinea’s strong reputation for exploration success by inviting oil and gas companies with the requisite financial and technical competency to explore its blocks.

A total of 114 discoveries have been made in the West African country to date, adding that the discovery success rate of 42% is double the global average.

Obiang Lima highlighted that a recent gas discovery in EG-01, made by a Brazilian exploration firm Oleo e Gas, has a high probability of being brought onshore for gas to power and potentially petrochemicals, depending on the amount.

The country is bolstering efforts to support and develop its energy infrastructure, including storage, petrochemicals and floating liquefied natural gas.

These efforts are expected to further drive exploration and production of the country’s indigenous resources.

Minister of Mines, Industry and Energy H.E. Gabriel Mbaga Obiang Lima said: “Our nation is a proven profitable home for global oil and gas companies that explore our waters, and now we look forward to meeting potential explorers at roadshow events worldwide in 2016.”

EG Ronda 2016 bidding round

During the launch it was said that the EG Ronda 2016 makes available all acreages not currently operated or under direct negotiation.

This comprises 37 blocks in total, 32 of them offshore. This includes Block A-12, newly relinquished by Marathon Oil, which has hosted multiple oil discoveries.

Also open is the former EG-05 block, which was formerly held by Glencore. EG-05 was then split into four prospective offshore licenses which have never been drilled.

2016

June 2016

03 June 2016

Ugandan cabbies face stiff competition with Uber entry

By Staff | The East African June 3, 2016

Kampala, Uganda's buzzing capital.

Weesam

Uganda’s local taxi operators face stiff competition after entry of global online taxi firm, Uber.

The American taxi hailing service, already operating in 462 cities in 71 countries, has upset the market in these nations with its low pricing business model.

“At Uber, we are proud to connect millions of global citizens to affordable and reliable rides. By offering a friendly and reliable complement to existing transport options, we can help improve urban mobility in Kampala,” Uber’s general manager for sub-Saharan Africa, Alon Lits said Thursday during its official launch in the Ugandan capital.

Uber charges its customers for every kilometre covered unlike regular cab drivers who price based on arbitrary spot negotiations with clients. Each trip is automatically and openly priced, helping users to budget for their travel expenses.

Customers seeking the firm’s services are required to download an Uber App, which they then use to call the taxis that are registered in the platform. The app allows customers to get a driver within the same vicinity reducing transit time.

However, the low pricing model has seen Uber drivers across the globe face threats, violent protests and legal action from regular cabbies who say Uber’s cheaper fares and business model are driving them out of business.

Uganda is the second country in East Africa after Uber launched in Nairobi early 2015 and extended its services to Kenya’s second largest city Mombasa in March this year.

With the Uganda entry, Uber now operates in five African countries including Kenya, Nigeria, South Africa and Egypt. The firm plans to launch in Ghana and Tanzania.

Uber rates

Uber has set a minimum charge of Ush5,000 (about $1.5) for rides in Kampala. Its clients will be charged a base rate of Ush1,300 and Ush900 per kilometre and an additional Ush200 per minute.

Customers will get free rides between Thursday 1pm and Sunday midnight. Cancellation of bookings will attract a charge of Ush5,000.

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