Add water and 1 teaspoon sugar to yeast in a small bowl and mix until pasty. Set aside and let rise until spongy.
Scald milk with margarine and cool to lukewarm.
Beat egg yolks. Add sugar and mix thoroughly. Add the cooled scalded milk mixture and beat until foamy. Mix in yeast mixture. Add flour gradually beating after each addition to make a soft dough. Beat until thick and springy, but note that too much flour will make hard doughnuts. Cover and let rise until doubled.
Shape dough into small balls. Let them rise on floured greaseproof paper until doubled.
In a deep fat fryer, heat oil to 190 degrees C. Fry doughnuts until brown. Then roll in sugar and cool.