Their 47-match winning streak at an end, coach Gordon Tietjens admitted his New Zealand team didn't deserve to win the Adelaide rugby sevens final.
South Africa ended a winning run stretching back to last year's Adelaide tournament when they upset New Zealand 15-7 last night.
Tietjens' side struggled to replicate their dominance from Hong Kong a week ago and the alarm bells were sounding when they snuck past Tonga 19-14 in the quarterfinals then needed a late Zar Lawrence try to topple Fiji 17-14 in the semifinals.
"We didn't really take our opportunities and our defence was pretty average in the final," Tietjens said.
"When you miss tackles in big games you're going to get punished and South Africa are a team that can do that."
Inspired by veteran Fabian Juries, who scored two tries to earn the player of the tournament award, South Africa avenged their 12-26 loss to the New Zealanders in the Hong Kong final a week ago.
New Zealand (126 points) remain almost certain to win their eighth world title in nine years with the England and Scotland tournaments still to come next month.
They now lead the series by 34 points from South Africa (92). Fiji have 74 and Samoa 68.
New Zealand's previous defeat was in last year's semifinals against Fiji and they'd won the first five tournaments of the 2007/08 season.
"I'm pretty proud of the boys -- 47 matches is an impressive effort and now we've just got to kick on and win the world series," Tietjens said.
"We didn't really talk about the winning streak. Every game was like a final to us."
It was a sad farewell for one of the New Zealand team's key men Steven Yates who played his last sevens match at the Adelaide Oval before taking up a Japan contract.
Tietjens hailed Yates' "huge" contribution in the past year and said the most disappointing thing about the defeat was they couldn't send him off victorious.
South Africa led 10-0 at halftime as New Zealand struggled to get into the final, before a Victor Vito special when he bulldozed three tacklers made it 10-7 with eight minutes left.
But Juries had the final say, darting between Vito and Lawrence to score with five minutes remaining.
At 29 the oldest South African player, Juries inspired them to the final with a brilliant chip and chase try in extra time to clinch their semifinal 17-12 against Samoa.
The departing Yates admitted the whole tournament had been a struggle.
"We had to scrap through all tournament this week after winning Hong Kong, we worked our hearts out but got beaten by a better team.;;
In the semifinals, Fiji looked headed for an upset when they led 14-5 midway through the second half before Lawrence's try 50 seconds from fulltime.
It was a big form turnaround for Fiji who New Zealand beat 34-0 in the Hong Kong semifinals.
Coach Josateki Savou created controversy in recent days when claimed some key players were influenced by a former senior player not to perform at their best in the Hong Kong match.
Former star Waisale Serevi acknowledged he was the senior player referred to, but strongly denied the accusations to Fijian media.