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SA’s economic woes expected for most of 2016

There are warnings SA’s political situation will continue to have a major impact on the economy.

FILE. Inflation hit seven percent last month and there's already been two interest rate hikes this year. Picture: EWN.

JOHANNESBURG - There are warnings that the political situation in the country will continue to have a major impact on the economy and the downward cycle is expected to continue for most of the year.

The African National Congress (ANC), Hawks and Public Protector will be investigating whether President Jacob Zuma's relationship with the Gupta family is part of a process of 'state capture'.

At the same time, the rand continues to weaken; inflation hit seven percent last month and there's already been two interest rate hikes this year.

Finance Minister Pravin Gordhan spent last month trying to convince international investors that government is serious about improving the economy, but allegations that the Gupta family has offered ministerial positions has raised concerns about investor confidence.

Economist Isaac Matshego says there are also concerns about a ratings downgrade.

"The news flow has not been very good and I think agencies have really raised their concerns about governance issues in South Africa."

At the same time, economist Lesiba Mothatha says the cost of living has increased.

"We're going to see that fuel levy come through the inflation rate. Electricity tariffs are gearing up and really eroding the cost of living."

Independent economist John Maynard has released a report saying the country needs to address its trade deficit which has ballooned to just over R150 billion since 2010 - due to the weak rand.