To confirm what we have been saying since the beginning, CEO of the Netherlands Development Finance Company (FMO), Arthur Arnold said in Johannesburg today the key to SA's economic future was the growth of small- and medium-sized enterprises.

He said medium-sized and small businesses created growth, jobs, stability and developed the middle class. "There can be no development unless you develop the medium and small sector," said Arnold.

FMO is the largest single investor in South Africa's first independent mezzanine fund manager, Vantage Risk Capital, announcing Thursday a 100 million rand investment in the Vantage Mezzanine Fund.

The foreign investment component in the fund will comprise some 30% of the fund's total first closing amount of 310 million rand.

Arnold said his company was impressed with the development of South Africa's capital markets and had therefore decided to invest.

He said it was normal for emerging markets to find access to capital difficult but that the new mezzanine fund in South Africa, which provided flexibility and took the pressure to invest away, filled the gap perfectly and would stimulate growth in this key area of the economy.

"The middle market as a driver has been proven everywhere in the world, and this will be no different in South Africa," he said.

"The success of BEE is a challenge as ultimately ownership needs to be shared for it to work," he said.

"The worst thing for an entrepreneur is to lose control, and the new mezzanine fund will ensure we get around this problem for small and medium businesses," he said.

Arnold added that FMO's goal was to contribute to structural and sustainable economic growth in developing countries and, together with the private sector, obtain healthy returns.

"In coming years I expect to see the size of this fund double in South Africa," he concluded the launch.

FMO was founded by the Dutch government and business community in 1970. The Dutch state holds 51% of its shares while the large Dutch banks retain 42%.

Arnold said the FMO supported the developing private sector in developing countries and emerging markets in Asia, Latin America and Central and Eastern Europe.

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