High yields mean North Africa is an attractive investment prospect for capital providers, according to Peter Stoner, managing director and global head of transport, infrastructure and industrials at Russia’s VTB Capital.

“Africa has become much more financeable,” he says. “The issue historically was that you didn’t have many benchmarks for North Africa and sub-Saharan Africa in terms of government bond issues that you could then use as a risk free rate to then think about funding costs, but that has been changing in the past few years.”

A milestone was reached in 2012 when VTB Capital managed Angola’s first, $1bn bond issue.

“Effective funding costs in Angola for the government before were over 10 per cent, but the bond issued eventually traded down to yield under 5 per cent,” says Stoner.

He says the low interest rate environment globally over the past seven years has driven investors to broaden their geographic scope in the search for higher yields. The sovereign debt issues are now set to unlock wider opportunities.

“Emerging market sovereign debt has been an area of high interest,” Stoner says. “So you have many African markets with benchmark issues, such as Mozambique and Angola. And now that is in place other forms of financing are following. We certainly see more potential for infrastructure financing in North Africa and sub-Saharan Africa given the interest from international capital in finding higher yield.”

He highlights Egypt as an interesting market to watch and says VTB Capital is considering some projects there, although he is unable to disclose details.

“It is another non-investment grade [market], where we are seeing a lot of interest from capital providers looking to invest at a higher yield rate. Egypt is part of the African growth story.”

VTB Capital is the investment banking arm of VTB Group, Russia’s second-largest lender and which is 60.9 per cent government owned. Qatar Holding has a 2.9 per cent stake in the bank, following a rights issue in 2013.