Cricket Australia revealed on Wednesday that scans had uncovered joint damage in the vice-captain's neck, but are confident he will be fit for the home summer.
Much of the fallout from Smith's unavailability in Cape Town has centred on the fact the batter ruled himself out.
It is understood Smith was struggling to move his head up and down, as evidenced by his first-innings dismissal in Gqeberha.
That prompted the fitness sessions at Newlands, before a call was made to have a pain-blocking needle in a last-ditch bid to play.
Ultimately, that further impacted Smith's range of movement even more, leading him to exit the nets before play and unavailable for the Test.
Even if Smith did not have the needle, he would likely have been unfit to play.
With him out, Josh Inglis has produced the most impressive innings of his career to help Australia take charge of the series decider.
Smith's scans last Friday detected an injury to a "cervical facet joint", which connects to the spine and acts to guide and stabilise neck movement.
"Due to this and his limited range of motion, he was unfit to participate in the current Test," Cricket Australia said in a statement.
"Steve will continue to receive treatment and rehabilitation, with a full return to availability anticipated for the upcoming home Test series against New Zealand."
Smith has six weeks to recover for the first Test against New Zealand, which will begin a run of 10 Tests in 14 weeks against the BlackCaps, India and England.
There remains uncertainty over when he suffered the exact injury, but it is not believed to be from when he edged Kagiso Rabda in the first innings in Gqeberha.
Smith had pulled Anrich Nortje overs earlier, and also slipped over while running through that same period, potentially causing the issue.
He sought treatment shortly after and was ultimately bowled between bat and pad in uncharacteristic fashion by Wiaan Mulder for 28.
Even after Friday's scans on arrival in Cape Town, Australia's coaching staff had been extremely confident Smith would be fit to face South Africa.
The 37-year-old batted in the nets for around 35 minutes on Sunday, two days out from the third Test, before sitting down and stretching his neck.
He then briefly returned to batting, before growing increasingly frustrated and walking out of the nets.
The injury means Smith is likely to never play another Test at Newlands, the venue of the 2018 ball-tampering scandal that cost him the captaincy and a 12-month ban.
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