The Assistant Minister of Finance and Development Planning, Charles Tibone, said the BDC board took a strategic decision to liquidate the company because it could not meet its operating costs.

This situation arose from the sudden collapse of the housing and commercial property construction sector in the southern African region and the global economic recession.

Tibone revealed that the aggregate demand for ceramic tiles in the region shrank from 55 million square metres per year to approximately 40 million square metres. As a result of the economies of scale, regional manufacturers responded by drastically reducing their prices.

"This, therefore, prevented market entry for smaller producers such as Lobatse Tile Limited," Tibone said. "The global economic downturn also had a severe impact on countries with large production capacities like India, Italy and China."

He added that the level of production in China reduced from 6 billion to 2.8 billion square metres per year, while India experienced a 20-percent reduction in production.

As a result of the slowdown in economic activity, Italian producers were forced to retrench 9,000 workers while a total of 42 companies were mothballed in Vietnam.

Tibone was responding to a question about the performance of three BDC subsidiaries in Lobatse, namely, Lobatse Clay Works, Lobatse Tile Limited and Can Manufacturing Botswana.

Can Manufacturing, which makes food cans to serve the southern African market, has been in commercial operation since July 2007 and operates state-of-the-art machinery.

Tibone said Can Manufacturing is relatively new but is competing against South African companies that have been in existence for over 50 years. The company is implementing a turnaround strategy anchored predominately on market penetration.

Tibone said the company has experienced slow off-take since its inception, resulting in unsatisfactory performance. Because the local canned food market is small, the current target market for the company is southern Africa where the industry is well developed.

The Assistant Minister also briefed Parliament about Lobatse Clay Works, which was established in 1989 as a joint venture between BDC and United States company, Interklin Corporation. However, it is now a wholly-owned BDC subsidiary.

Lobatse Clay Works is a successful clay face brick manufacturing outfit that has a brand presence in the local market.

Tibone said the company experienced operational hardships when the technical partnership with Interklin Corporation ended in 2000.

The company made losses and was not able to pay its creditors who ended up foreclosing on it. The company was saved at provisional liquidation by BDC.

Thankfully, Tibone said, the company's performance has since turned around and has consistently made profits for the past two years. It is now embarking on an expansion programme that will result in consistent production of lighter shades/colours of clay face bricks, which will allow for increased market share.Lobatse Clay Works mines its clay resource in Lobatse and Mmamabula.