He will be extradited to Mozambique, where he is wanted on similar charges.
South Africa's government has turned down a request from the US to extradite Mozambique's former Finance Minister Manuel Chang to stand trial on corruption charges.
Instead, Mr Chang would be extradited to Mozambique, where he is wanted on similar charges.
"I am satisfied that the interest of justice will be best served by acceding to the request by the Republic of Mozambique," South Africa's Micahel Masutha said in a statement.
Mr Chang was arrested in South Africa in December at the request of the US for his alleged involvement in $2 billion of borrowing that US authorities alleged was fraudulent.
Mozambique asked for his extradition soon after the US submitted its request.
Last month, a South African court ruled that Mr Chang could be extradited to the US.
But Mr Masutha said he took into account the fact that Mr Chang was a Mozambican, and had asked to be extradited to his home country.