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Government spokesperson Jimmy Manyi told a post-Cabinet press conference in Parliament that the Cabinet had turned down the South African Sports Confederation and Olympic Committee's request to bid for the Games because it wanted to spend money on basic service delivery.
Sascoc president Gideon Sam said last month that if South Africa did bid, R30billion would be needed to build new venues.
Manyi said the bid alone would have cost over R300million. "You know how many RDP houses you can build (with that)," he said.
He said the government did not want to be distracted from its five key priorities, which were job creation, health, education, rural development and fighting crime.
"The decision taken is final. Cabinet has not taken this decision lightly - it has considered the whole view of the euphoria of the World Cup and the gains that we still need to consolidate. Cabinet has felt that it is better to focus the energies of the rest of the country on basic service delivery," Manyi said.
The Cabinet wanted to adopt a new "laser approach" where it zoomed in on its five priorities, especially job creation.
Durban will still be the host city for the International Olympic Committee's congress in July. Sascoc CEO Tubby Reddy said he was disappointed but respected the decision.