Justin Kemp and Morne Morkel led South Africa to a six-wicket win in Durban.
Morkel took four for 17 as the Proteas, who elected to bowl, kept the BLACKCAPS innings to 153 for eight.
Kemp led his side to victory with an impressive 89 from 56 balls, including six fours and a half-dozen maximums.
The result leave the BLACKCAPS waiting on other results in their ICC World Twenty20 Super Eight group before they can claim a place in the semi-finals.
Once again, Craig McMillan was the top scorer with an unbeaten 48, from just 25 deliveries, after openers Brendon McCullum (38) and Lou Vincent (32) had built a strong platform with a 68-run stand.
However, only Jacob Oram, with 15, followed the trio into double figures, with Morkel thriving.
South African captain Graeme Smith and AB de Villiers were removed cheaply as the hosts’ reply began slowly.
But those dismissals brought Kemp to the crease, and the Eastern Province all-rounder took charge.
Dominating partnerships of 60 with Mark Boucher (23) and 48 with Shaun Pollock, Kemp ensured a home victory with a six off the first ball of Mark Gillespie’s final over.
The BLACKCAPS remain in a qualifying position, but would look for the Proteas to defeat India to confirm their passage to the last four.
for Daniel Vettori's post-match press conference.
