Banyana were undone by Desire Oparanozi's 54th minute free-kick in Limbe.
The Super Falcons booked a spot in Saturday's final alongside Cameroon, who defeated Ghana 1-0 in the earlier semi-final courtesy of Raissa Feudjio's 71st minute strike.
Nigeria beat the tournament hosts 2-0 in the 2014 final in Windhoek, Namibia.
Desiree Ellis's charges will battle the Ghanaians for bronze on Friday.
TEAMS South Africa:
Andile Dlamini(GK); Lebogang Mabatle; Janine Van Wyk (c); Bambanani Mbane; Nothando Vilakazi; Mamello Makhabane; Refiloe Jane; Leandra Smeda; Linda Motlhalo; Silindlie Ngubane; Andisiwe Mcgoyi.
Subs:
Yolula Tsawe(GK); Astria Boks; Noko Matlou; Nompumelelo Nyandeni; Amogelang Motau; Thembi Kgatlana; Shiwe Nogwanya.
Nigeria:
Alaba Jonathan (GK); Faith Ikidi; Osinachi Ohale; Onome Ebi; Asisat Lamina Oshoala; Ogochi Desire Oparanozie; Rita Chikwelu (c); Ngozi Okobi; Ugo Njoku; Francisca Ordega; Halimatu Ayinde.
Subs: Ibubeleye Whyte (GK); Osarenoma Igbinovia; Ngozi Ebere; Wogu Success; Ukpong Ester Sunday; Gladys Akpa; Gloria Iroka; Ijeoma Obi; Uchechi Sunday; Rita Akarekor (GK).