The Amaglug-Glug team's hopes of qualifying for the Olympic Games in Athens took a knock when they went down 1-0 to Zambia at Olen Park on Saturday afternoon.
South Africa can still qualify for the finals, but they will most probably need to win all three of their remaining games to do so.
The group was thrown wide open earlier today after Algeria surprised the Ghanaians 1-0.
Amaglug-Glug had only themselves to blame for today's defeat after failing to convert the many chances which came their way, mainly through the two Orlando Pirates wingers, Joseph Makhanya and Gift Leremi.
Ryan Botha, who was the two goal hero in the U-23's 4-1 hiding of Algeria last week, had an off day, which was highlighted by his woeful penalty attempt which sailed high over the bar.
The first half was a fairly even and goalless affair with both teams enjoying an equal amount of chances on goal.
Zambia then took the lead in the 48th minute through one of their rare attacks when burly striker Collins Mbesuma, who troubled the home defence throughout the game, did well to hold off a defender and rifle home an unstoppable left-footed shot.
The home team tried in vain to grab an equaliser, but although they spent large periods camped in their opponents territory, they were just not able to take their chances inside the box.
Coach Conti Kubheka at least has the consolation of knowing that Mabhuti Khanyeza and Bennedict Vilakazi will be available for the next games, which will certainly add some striking power to the team.