The Cross-Border Road Transport Agency (C-BRTA), the Road Accident Fund (RAF) and the Passenger Rail Agency of South Africa (PRASA) briefed the Committee on their annual performance plans, strategic plans and budgets..
C-BRTA said there were 53 land border posts between South Africa and neighbouring countries, 19 of which were designated as commercial border posts. Four of them – at Beitbridge, Lebombo, Maseru and Skilpadshek -- carried over 70% of the commercial and freight traffic. The cost of doing business for operations was impacted by delays at the border posts, inadequate roads and parking infrastructure at the posts, and the frequency of stoppages for law enforcement along the transport corridors. As a player in the regional environment, C-BRTA was affected by what happened in the region and globally. It viewed Africa as a whole being riddled with inexplicable barriers to trade, therefore constraining its economic growth. Trade within the Southern African Development Community (SADC) was very low.
C-BRTA said a new strategic objective was to improve efficiencies in its business operations, while another was related to the promotion of transformation and development in the cross-border industry. Accordingly, the key strategic focus areas for 2017/18 were based on three pillars -- strategic positioning, financial sustainability, and regulatory reforms. It had a Board comprised of 12 members, but five vacancies existed and the process of filling them was under way. Its budget was constrained by an unsustainable funding model, operator refunds on 2011 regulations, and the Free State/Lesotho impasse.
Members felt that a strategic plan was needed for effective implementation of the SADC Protocol, and objected to the need for a proposed workshop to deal with this issue. They sought clarity on why the C-BRTA was focussing on engaging with municipalities, instead of with the SA Local Government Association (SALGA). They asked about the huge budget allocated to litigation, and how the litigation costs affected their balance sheet and overall work, how the Board had ended up with only seven members, the role of law enforcement in respect of delays, on regional integration and whether other countries were responding to the C-BRTA approach to regional integration.
The Road Accident Fund reported that it had achieved an unqualified audit opinion. Fruitless and wasteful expenditure had grown slightly to R31.1 million, from R24.5 million, and the Auditor General of SA (AGSA) had identified nine findings relating to its supply chain management. The key challenges were efficient financial management, improved people management, inadequate funding, continuation of the RAF dispensation and the delayed introduction of the Road Accident Benefit Scheme (RABS), and mitigation measures.
Reporting on budget constraints and revenue generation, it said that the RAF did not generate organic revenue streams. The fund did not have a surplus for investment and had no assets to borrow against. The RAF’s cash constraints had been known about for four years, and had been reported on extensively before manifesting themselves. As result, the RAF’s budget approach had moved from solvent budgeting to ‘pay as you go’, and now to ‘pay what you can, and the rest when possible’.
Members expressed their discomfort with the pervasive issue of insolvency and financial constraints. The manner in which money was spent was unsatisfactory. The question of the RAF’s branding was a centre of discussion, because it had not been approved by the Committee. Members sought clarity on how the RAF made sure that it complied with the BBBEE, on whether the RAF compensated a person who was also negligent, on what had caused the RAF to incur insolvency, and what measures had been adopted to address this major financial challenge.
PRASA said rail was the backbone of public transport. It responded to the rate of urbanisation, and needed to be safe, efficient, reliable, affordable and customer-focused. The rail benefits included its capacity, its limited impact on the environment, its limited land requirement, and the reduced public reliance on cars and fuel. The 2017 revenue budget was R8.5 billion against budgeted expenditure of R10.9 billon. The expenditure included the funding of its turnaround strategy, and the maintenance costs on old assets and for new trains. If savings or cuts were not realised, PRASA would once again face a negative bottom line, leading to serious cash flow constraints. AGSA’s action plans for the entity included the introduction and implementation of proactive assurance in key processes, a supply chain management policy in line with Treasury regulations, forensic investigations into irregular expenditure, and the appointment of an accounting expert to advise on matters.
Members commented that during its engagement with the Railway Safety Regulator (RSR) the previous week, an alarming issue had been raised regarding complying with safety. They had gained the impression that there was not a good relationship between PRASA and the RSR, with little cooperation. Stations were in a bad condition, and this was very concerning because this was where commuters would get on to trains. Members felt that working towards having more trains would be futile if stations were in a bad condition and posed risks to the commuters. They questioned why PRASA could pay Transnet millions of rand to use the railway, which was a public facility. They sought clarity on whether the turnaround strategy could be implemented within 12 months. Vandalism of trains was a major issue, and PRASA was taken to task for not doing enough to protect its assets. It was also suggested that harsher penalties should be imposed, and the vandalism should be re-categorised as arson.
Cross-Border Road Transport Agency (C-BRTA): Annual Performance Plan
Mr Nchaupe Maepa, Chief Operating Officer: C-BRITA, said there were 53 land border posts between South Africa and neighbouring countries, 19 of which were designated as commercial border posts. There were four border posts that carried over 70% of the traffic (commercial and freight) -- Beitbridge, Lebombo, Maseru and Skilpadshek. These border posts were located on the busiest corridors linking South Africa to the South African Development Community (SADC) region -- North-South, Trans-Kalahari and Maputo/N4 corridors. The cost of doing business for operations was impacted by delays at the border posts, inadequate infrastructure (roads and parking) at the border posts, and the frequency of stoppages for law enforcement along the transport corridor.
Mr Maepa said that as a player in the regional environment, the cross-border industry was affected by what happened in the region and globally (for example, Brexit). He viewed Africa as a whole being which was riddled with inexplicable barriers to trade and therefore constraining its economic growth. Intra-SADC trade was very low. Since 1994, South Africa had regarded the SADC region as the most important priority in terms of international relations, in that South Africa was a signatory to the SADC Protocol on Transport, Communication and Meteorology. It was noted that a decision had been taken to repeal bilateral cross-border road transport agreements and to replace them with a single Multilateral Cross-Border Road Transport Agreement (MCBRTA).
Changes had been made to the strategic plan. Goals had been reduced from five to four and the number of indicators streamlined from 18 to 13. A new strategic objective was to improve efficiencies in business operations, while another related to the promotion of transformation and development in the cross-border industry. Accordingly, the key strategic focus areas for 2027/18 were based on three pillars -- strategic positioning, financial sustainability and regulatory reforms. The C-BRTA’s research agenda was geared towards supporting the achievement of the key strategic focus areas. He went on to describe the indicators carried over from 2016/17, as well as the transformation initiatives for 2017/18.
Mr Meapa said that C-BRTA’s revenue for 2017/18 and 2018/19 was R214 861 000 and R223 339 000, respectively. Key budget assumptions were related to the transfer of the law enforcement function to the Road Traffic Management Corporation (RTMC) as of April 2017, and operation’s liability from the 2014 constitutional court judgment would be funded from the C-BRTA’s balance sheet. Total expenditure for 2017/18 and 2018/19 was R231 361 000 and R238 339 000 respectively. In the 2015/16 financial year, a clean audit had been achieved, compared to unqualified and qualified audits in the previous years. There was a technical insolvency as a result of the entity’s liabilities exceeding its assets by R220 million.
Mr Maepa said that the C-BRTA’s Board was comprised of 12 members, but it had only seven members and therefore five vacancies existed. The process of filling vacancies was under way.
He concluded that C-CRTA’s budget was constrained by the following issues its unsustainable funding model, operator refunds on 2011 regulations, and the Free State/Lesotho impasse.
Mr G Radebe (ANC) sought clarity on the workshop and the intention to arrange a workshop with SADC countries on the SADC Protocol, on how organisational performance would be improved and why the C-BRTA was focussing on engaging with municipalities, instead of the SA Local Government Association (SALGA). In his view, the C-BRTA should engage with SALGA, which represented the interests of all municipalities. Referring to the audit report, he congratulated the entity on its financial improvement, but sought clarity on huge budget allocated to litigation and how the litigation costs affected their balance sheet or its overall work.
Mr L Ramatlakane (ANC) sought clarity on whether the Auditor General’s (AG’s) report was saying the same thing or whether it was talking about new issues. He asked what had been done to address the issues raised in the report, about the implementation of the SADC protocols, on the user charge model, and on who the stakeholders of the C-BRTA were. How had the board of directors ended up with seven members? Did they resign, or what happened? He asked the entity to elaborate more on the relations with Lesotho.
Mr M de Freitas (DA) asked what the delays referred to in the presentation were, how C-BRTA ensured that neighbouring countries implemented its rules, on the role of law enforcement in relation to delays, on the regional integration and how this could be managed, and on whether other countries were responding, hence they could be dictated on what to do.
Mr M Mabika (NFP) sought clarity on the compensation of employees. He congratulated C-BRTA on achieving a clean audit and commented that they should come up with strategies to sustain such a record. He further sought clarity on the vacancies in the board of directors and asked whether the board could take a decision, since seven members sis not constitute a quorum. He suggested that the Minister should intervene in the appointment of the other members for the board to it to be able to function.
Mr M Sibande (ANC) sought clarity on the issuance of licences and the possibility of duplication of licences, in the context of South Africa and Lesotho issuing licences at the same time. He expressed his concerns about the repeal of bilateral cross-border agreements, and said that he was worried about the implementation of a single MCBRTA and the question of the equal treatment of drivers in the SADC region. He sought clarity on the questions about a small portion of land which was disputed by South Africa and its neighbour country, and said that this piece of land could be used as a parking area. Had this land issue been resolved? He sought clarity on the allocation of a high budget for the Constitutional Court litigation, and why disputes always had to be resolved by the courts. Were there no other mechanisms that could be used to resolve issues? He also asked about law enforcement, and whether it had the ability to fight against border gangsterism. He said that there were cross-border gang groups such as “amaninja” and “amagumaguma” which were taking advantage of legal loopholes to further their gang activities.
The Chairperson commented that further questions should be directed to the C-BRTA in writing and, similarly, the C-BRTA could respond to the questions in writing.
The C-BRTA responded that the intention of the SADC workshop was to look at the SADC protocol and to look where they were – as a country. It was all about determining what the challenges were and what other countries were doing to ensure that the Protocol was implemented. It had a negative impact on the entity’s operations, and the main intention was to sit with the Secretariat and point out what the challenges were and what plans were in place to implement the Protocol, and thus to agree together on what interventions were needed.
The Chairperson said that if the challenges were identified, the C-BRTA had a duty to report to the Committee and make it clear that it had not been able to live up to ideals of the SADC Protocol. She said she was aware that some countries were not complying, but the C-BRTA should brief the Committee on what could be achieved, or how far the C-BRTA was in implementing the Protocol, as this information was of paramount importance. If there was no such information at their disposal, they could respond in writing.
The C-BRTA responded that it would, at the right time, come to brief the Committee on that matter. The workshop was to look deeply at the challenges and interventions. It was all about emgaging with South Africa’s sister countries so that the C-BRTA could see how their legislation could be revised.
Mr Ramatlakane dismissed the C-BRTA’s contentions, and commented that the determination of whether the Protocal was workable did not need a workshop. Instead, the C-BRTA should disclose information regarding the challenges it faced, and the Committee would take it from there.
The Chairperson said that the Committee was capable of engaging with the Parliaments of SA’s sister countries. She agreed with Mr Ramatlakane’s approach.
The C-BRTA said its approach was to engage with municipalities, and further noted that the filling of vacancies on its board was regulated by its enabling legislation. On the law enforcement, it said that 130 officers had been transferred to the Road Traffic Management Corporation (RTMC). On the financial implications, it said that it would reduce its finances, sacrificing R32 million in penalties and fines, and about R80 million per annum would be sacrificed.
Road Accident Fund (RAF): Annual Performance Plan
Dr Eugene Watson, Chief Executive Officer (CEO): RAF, said that the RAF had achieved an unqualified audit opinion in 2015-16. Fruitless and wasteful expenditure had grown slightly to R31.1 million, from R24.5 million. AGSA had identified nine findings relating to supply chain management.
He reminded the Committee that it had recommended that the RAF to adopt strategies to address the financial health of the fund, and provided details of the actions taken in this regard.
The full 2016/17 APP report had been reviewed by internal audit for the year ended 31 March 2017, and it had shown that 27 targets, representing 90%, had been achieved.
The key challenges were efficient financial management, improved people management, inadequate funding, continuation of the RAF dispensation and the delayed introduction of the Road Accident Benefit Scheme (RABS), and mitigation measures.
Reporting on budget constraints and revenue generation, he said that the RAF did not generate organic revenue streams. The fund did not have a surplus for investment and had no assets to borrow against. It was also important for the Committee to recognise that RAF’s cash constraints had been known about for four years, and reported on extensively before manifesting themselves. As result, the RAF’s budget approach had moved from solvent budgeting to ‘pay as you go’, and now to ‘pay what you can, and the rest when possible’.
Mr C Hunsinger (DA) commented that, throughout the presentation, the question of insolvency and financial constraints had been emphasised, which made the presentation disturbing. Some elements under the expenditure column, detailing where money was spent, were shocking. Yet tenders were also engaged in prematurely. Many issues that needed to be endorsed by the Committee had been embarked on without following the procedural process, and this was disturbing.
Mr Radebe asked whether the findings had been identified by the RAF’s internal audit or by the AGSA. What were the management consequences of these findings, as the RAF could not continue in such a way? Referring to the litigation management, he sought clarity on how the RAF made ensure that it complied with the Broad-based Black Economic Empowerment (BBBEE) and on the principle of compensation for loss -- in particular, whether the RAF compensated a person who was also negligent. Could a person who was at fault be compensated -- for example, a drunken driver?
Mr Sibande welcomed the section of presentation talking about empowering youth, but commented that nothing had been said about empowering women. He sought clarity on what caused the RAF to incur insolvency. Was it due to medical and legal practitioners that were charging exorbitant amounts of money? What should be done to address the issue of insolvency? Why was the RAF relying heavily on consulting services, instead of employing? Should money spent on consulting services be included in the wasteful expenditure? Despite the proposed amendment Bills, were there no other aspects of law that needed revision to ensure that the RAF carried out its mandate without other legal hardships?
Mr Ramatlakane expressed his deep concerns about the RAF’s insolvency, and sought clarity on what measures had been adopted to address this major challenge.
Dr Watson responded that the question of premature engagement in tenders fell within the powers of the Board, and the Board was looking at bringing in significant changes in the RAF’s operations. It was the responsibility of the Board to ensure that there were plans to address the challenges. It was therefore not early to start planning. Problems could arise under circumstances in which everything was planned, but the RAF did not implement these plans. In such cases, failure to implement plans or strategies could not be used as an excuse. He assured the Committee that the management should be held responsible for such premature engagement.
The biggest problem was the perceptions that were touched on the cash flow. The process of appointing new CEO was at final stage. Regarding promotion of gender equality, the RAF was most progressive regarding empowering women. It was very sensitive in appointing women in all levels. It was quiet obvious because even the RAF delegation was gender neutral.
Dr Watson said that the reason for briefing the Committee was to account to Parliament. They were there to discuss both the RAF’s operational and financial performance, which were important elements. An entity could have a clean audit, but lose it due to predetermined objectives, and a clean audit could also be achieved but lot due to irregular expenditure. There were others laws that ought to be complied with, such as the Public Finance Management Act (PFMA) that could have a negative impact on auditing.
With regard to the question of negligence, he responded that the RAF could not pay compensation to a driver who was negligent. Other countries might do so, but in South Africa it was not possible.
On the question of outsourcing consultants, he was of the view that the RAF did not rely heavily on consulting services, because these ought to be approved by the Board and National Treasury, in accordance with the supply chain management policy. In the constitutional dispensation, the management made sure that the work of RAF was not irrelevant. Consulting services were not continuous.
On the question of whether auditing was done by the same people, he responded that it was done by different people.
The Chairperson remarked that whatever the RAF could do, it should be done within the confines of the law. It was not one individual in the entire structure who was keeping on doing the same thing. With regard to disciplinary warnings, different types of measures could be imposed, including verbal and written warnings, as well as dismissal. For example, an executive had been dismissed for irregular expenditure few years ago. Measures were imposed, despite of the wrongdoer’s rank or position.
For claims that were lodged within three years, there was a law regulating the provision of accident funds, adopted in 1993. It provided that the Board would supervise the RAF. It stated that a report should be compiled and submitted to the Minister prior to being submitted to Parliament. This report had been submitted to Parliament, and had indicated that there had been an increase in paying out claims that had been outstanding for three years. In this context, the percentage of outstanding claims had become lower. There had also been progress in paying out complex claims.
Dr Watson said that there had been good progress in the payment of those claims that were subject to litigation. Some claims were not paid because the RAF could pay only what it could, despite the circumstances of claimants.
Mr Radebe commented that he had a problem with the entity getting involved creating a brand without the Committee having approved such branding. This was serious, because opposition political parties would speak against this simply because the Committee had not approved the branding, or the procurement involved. How did the RAF anticipate that the Committee was going to agree with it?
Dr Watson responded that the RAF was working under the guidance of the Committee, and was ready to provide the Committee with the break-down of its branding initiative, and if the Committee did not approve of certain aspects, the RAF was happy to reconsider its branding.
The Chairperson commented that the RAF’s operations should be done within the confines of the law, and the RAF should go and rework its APP in accordance its operations that fell within the framework of the law. A bill could be proposed, and the Committee was willing to work hand in hand with the RAF to ensure its concerns were addressed, but the RAF could not jump the gun.
Passenger Rail Agency of SA (PRASA): Annual Performance Plan
Dr Sipho Sithole, Group Chief Strategy Officer: PRASA, said that PRASA was the backbone of South Africa’s public transport. It responded to the rate of urbanisation, and needed to be safe, efficient, reliable, affordable and customer-focused. The rail benefits included its capacity, its limited impact on the environment, its limited land requirement, and the reduced public reliance on cars and fuel. PRASA’s strategic objectives were aligned with national government imperatives, including the NDP, the Department of Transport’s 2015-2020 national strategic plan, and the State of Nation Address.
In PRASA’s capital and budget programme, the 2017 revenue was R8.5 billion, while budgeted expenditure was R10.9 billon. This expenditure indicated a shortfall of R1.9 billion before finance income and costs, depreciation and amortisation of the capex subsidy. Expenditure included the budget spent on PRASA’s turnaround strategy, the maintenance cost of old assets, and new trains. He noted that if savings or cuts were not realised, PRASA would once again face a negative bottom line, leading to serious cash flow constraints.
The Auditor General’s action plans included the introduction and implementation of proactive assurance in key processes, a supply chain management policy in line with Treasury regulations, forensic investigations into irregular expenditure, and the appointment of an accounting expert to advise on matters.
Mr Hunsinger commented that when the Committee had had an engagement with the Railway Safety Regulator last week, there was an alarming issue that had been raised in terms of complying with safety. He had gained the impression that there was not a good relationship between PRASA and the Railway Safety Regulator. There was little cooperation, and this had created bad perceptions about the role and functions of PRASA and the Railway Safety Regulator. Stations were in a bad condition, and this was very bad because this was where commuters would get on to trains. One might have as many trains as one wanted, but this would be futile if the stations were in bad condition and posed risks to the commuters. He wanted to get the reaction of PRASA to that matter.
He sought clarity on amount spent on the usage of rail transport, and the amounts that were paid to Transnet. How much did PRASA pay to Transnet, and how much did Transnet pay to PRASA for using each other’s rail system? Could anyone explain this kind of railway ownership? In the Western Cape, on that morning, 30 trains had been cancelled and this had left commuters unsafe. In addition to this, trains were not arriving on time and were not clean. Trains were unsafe to commuters. He admitted that there was vandalism, but the vandalism was taking place because PRASA was incapable of protecting its own assets. The yard in which trains were parked, for example, were not fenced and anyone could walk in and torch a train or steal. PRASA should consider protecting its assets, and should not be conduct itself irresponsibly regarding the protection of its assets. He asked why someone torching a train could face a minor charge when the crime committed should be arson. He sought clarity on the PRASA targets which had no time frames, why targets were not specific and time-based, why the PRASA had provided wrong or inaccurate information with regard to the AG’s report, and why insurance claims were listed under expenditure,
Mr M de Freitas (DA) said that he would like to get responses to the above questions in writing, and said that PRASA’s system was disastrous. People were reporting for work late due to train delays. PRASA had to explain how it had come up with its turnaround strategy, and the impact on its operations. How could it be possible to turn around PRASA within 21 months? He sought clarity on the relationship between PRASA and Transnet, but commented that he was not expecting PRASA to give clear and proper answer; as he assumed that the relationship between these two entities was political. He said that trains were not suitable for use due to their condition, and this was very strange because many people relied on trains for their transportation. The trains that would be introduced were not conducive to the environment -- how could this be the case? These trains were being inspected by the Minister of Transport for a launch.
Mr Radebe suggested that the question of vandalism should be criminalised, and sought clarity on the introduction of the new ticket system. Customer service satisfaction was rated at 80%, and this should be 100%. He said that employees’ labour problems should be resolved for operational improvement. He asked whether the forensic investigation was budgeted for or not, and about what had happened to the delayed Fransman Report.
Mr Ramatlakane remarked that the turnaround strategy was still in the kitchen and was not ready to be dished out. He wanted to know why the turnaround had been given 12 months, and asked why stations’ conditions were not improved. PRASA could not look into future before its existing issues were addressed. There was no need to have 20/20 vision to see that what PRASA had was falling into pieces. The security of assets was important. The security of commuters was very important as well.
Mr Mabika asked how many community members were employed and how many communities benefited from PRASA’s projects. What had PRASA achieved in terms of auditing? Was it clean audit? If it was a clean audit, how did PRASA plan to sustain what it had achieved? He commented that vandalism was a societal problem and asked what assistance PRASA needed from the Committee to address this issue.
Mr T Mulaudzi (EFF) asked about the fixing of warning signs, and what caused PRASA to be slow to fix them. He commented that PRASA’s board members did not form quorum, because some of them had resigned, so how would decisions be reached. He asked why there was no reduction recorded with regard to litigation costs, and whether PRASA considered court cases when planning the budget. How much was the Department of Transport going to assist in terms of subsidy, and what scale was the Department using in order to subsidy the trains? It was surprising to see that a lot of money was committed to subsidising the Gautrain (which was used by rich people), and not the railway trains (which were used mainly by the poor).
Mr Hunsinger asked whether the presentation had been approved by the Board.
The Chairperson commented that trains were not safe for commuters, because one could hear people complaining about muggings on the trains and at stations, and trains were filthy. One had to ask what most of PRASA’s employees did.
She commented that the relationship between Transnet and PRASA was not only political, but also operational. It would not be an easy task to explain why PRASA paid Transnet for the use of a railway that belonged to the people of South Africa. The railway belonged to neither PRASA nor Transnet, but to the state. How could these two state entities pay each other to use the state facilities to serve the people? This was wrong.
The issue of vandalism was very serious matter. The was a need for PRASA to go out and find the people who set trains on fire and make sure that they were brought to book. She sought clarity on how the turnaround strategy would be implemented, and said that the turnaround strategy should be submitted to the Committee.
PRASA responded that the presentation had been approved by the Board. What the Minister was launching was coaches and locomotives -- that was where the controversies were. PRASA had no choice but to respect the railway safety regulations and it had to work to strengthen the relationship between it and the Railway Safety Regulator.
The main challenge was how PRASA was running its business, which was old in age although PRASA was still a young and new company. It was only eight years old. The PRASA had to go through different phases which were purely project based. There were four phases, including the consolidation of PRASA between 2006 and 2008, which was when the legal succession had changed. Then there was the 2010 World Cup that had led PRASA to giving a particular focus on fixing trains and ensuring that trains ran smoothly. After that, there was the train modernisation project which included the question of signs and signals. Looking back, PRASA had not considered the question of how an effective security system could be run. If it has been indicated that there was an intention to turn around PRASA in the next 12 or 24 months, it should first have been stated where PRASA was.
Regarding Transnet, the issue was neither political nor operational, but policy. Transnet was a big brother. It had become a commercial company and had started charging PRASA for infrastructure, and that was what South Africans were paying for. Despite that, Transnet was charging R800 million a year to use its infrastructure. PRASA owed funds to Transnet, and hoped that the economic regulators would intervene and assist in resolving that major problem. It was therefore an economic regulatory issue. It was an issue that could be resolved by the Committee.
Regarding the turnaround strategy, PRASA was not indicating that things would be turned around with a 12-month timeframe. Within the first three months, the coaches that were needed would be determined, including electrical sub-stations and rotating. Stabilisation and consolidation of the identified/installed elements would be the main focus in the next few months. There was also a need for disciplining employees, from the top to the lower levels. Consequence management was cited in the Auditor–General’s report a lot. There were actions that could be taken -- for example, if one found a depot open and unattended because no security was guarding it, although a lot of money was paid to a security company for this purpose. It was a war that PRASA ought to wage. It was a tough life that PRASA was dealing with, and it was getting the Department of Labour to assist. It was committed to ensuring a labour relations environment which was conducive to everyone. PRASA had managed to avoid the costs that could have been related to strikes. There had been tough negotiations to resolve this.
The meeting was adjourned.
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