The Springboks ran out 28-19 winners.
Scotland had lost out 34-0 to Samoa in the quarter-finals of the tournament's main Cup competition after finishing second in their pool on Saturday.
However, the Scots put in a storming display in the Plate semi-final to dispatch Australia 17-7 - setting up the final with South Africa.
Gcobani Bobo gave Paul Treu's side an early lead in the final but Scotland hit back through Mike Adamson and then Mark Robertson, following good work from wing Thom Evans, to lead 14-17 at the break.
South Africa dominated the second half with three tries from Mpho Mbiyozo, Howard Noble and captain Jonathan Mokuena to Scotland's one, scored by Lee Kibble, although Scottish coach Stephen Gemmell will be heartened by his side's considerable improvement since the start of the season.