The Blitzboks relinquished a 17-7 lead to lose 19-17 to Australia in their Singapore Sevens Cup quarter-final on Sunday.
Siviwe Soyizwapi and Chris Dry scored tries to give South Africa a 10-7 lead at half-time, and they made it 17-7 when Philip Snyman dotted down with three minutes to go.
But Australia captain Tom Lucas scored with two minutes remaining, with Dylan Sage then getting yellow-carded.
The Aussies made their numerical advantage count as Lachie Anderson scored a try and John Porch kicked the match-winning conversion.
In the other Cup quarter-finals, the USA shocked Fiji 24-19, Canada upset New Zealand 26-14 and England edged Kenya 13-12.
Australia went on to lose 40-7 to the USA in their semi-final, while England were beaten 17-5 by Canada.
Canada then won their first-ever title when they overcame the more fancied USA 26-19 in the final.