Ratings agency Fitch said on Tuesday it was concerned about South Africa's deficit reduction plans given that economic growth is likely to slow next year.
In an interview with Reuters, Richard Fox, head of Fitch's Middle East and Africa sovereign ratings team, said government revenues could fall short of targets in 2012/13, which ends in March 2013, due to a slowdown in Africa's largest economy.
The private sector consensus seems to be for a slowdown in growth next year. That's probably going to be our view as well given our assumptions about the euro zone economy, that's going to make the policy framework more challenging, he said.
There's a risk that revenue would be hit by slower growth so the government may have to work a bit harder to achieve the deficit and debt targets. But even if there was an overshoot we would imagine it wouldn't be huge.
Fitch will release an appraisal of South Africa's ratings in January, Fox said.
In its three-year fiscal programme unveiled last month, South Africa's National Treasury said the budget deficit in 2011/12 would be 5.5 percent of GDP, bigger than previously forecast, mainly due to lower revenue, and saw it narrowing to 4.5 percent of GDP in 2013/14.
The Treasury also cut its 2011 growth forecast to 3.1 percent from 3.4 percent and expected GDP growth of 3.4 percent next year.
That will be less than half the 7 percent growth the government has said is needed to make a meaningful dent on unemployment, which now stands at 25 percent of the labour force.
Fox said Fitch would watch to see whether some proposals put forward by the National Planning Commission about improving the quality of education to create jobs would gain traction next year.
Factbox and story on National Planning Commission
The Fitch sovereign ratings team was in South Africa last week for a routine review and will finish its analysis in mid-January.
Moody's downgraded the outlook on South Africa's A3 rating to negative early in November, citing concerns about political developments.
Fitch's rates South Africa one notch lower than Moody's at BBB+ but does not share Moody's political concerns. It expects broad policy continuity whatever happens on the political front next year, Fox said.
The ruling ANC will hold a leadership election next year when President Jacob Zuma will go head-to-head with a candidate from the wing of the party that is advocating a radical transformation of the economy, including nationalising giant gold and platinum mines.
Our base case at this stage is that the conference next year is going to be pretty much a restatement of existing ANC government policies.
If that changes, then we would have to change our assessment but at this stage we don't see a major risk of that happening.
Fox said Finance Minister Pravin Gordhan did not seem to be facing any pressure to make up for structural deficiencies such as high unemployment by increasing spending.
I don't get the impression political developments are going to result in any major change in spending over the rating horizon.
There has been concern among some investors that South Africa may resort to expansionary fiscal policies to placate millions of poor who are disillusioned by governments failure to improve their living conditions.
Fox said talk about nationalising mines to address poverty was political noise. We are used to political noise.
If we thought there was going to be a major change in the policy environment we would have concerns. But, I think at this stage we regard it as the sort of normal debate that you get in the ruling alliance, he said.