Andrew Strauss praised his players but admitted South Africa were the better side this summer as the tourists secured a 2-0 series win at Lord's.
The England captain watched from the balcony as Graeme Smith's side won the third and final Test by 51 runs, replacing their opponents at the top of the Test rankings after they were finally bowled out for 294.
It was closer to the victory target of 346 than most thought possible and was courtesy of some resilient batting from Jonathan Trott, Jonny Bairstow and Matt Prior.
"This was an outstanding Test and there was some good, first-class cricket on show," Strauss told Sky Sports.
"We were never the favourites today but the guys showed spirit and the attitude they showed was of great credit to the players.
"South Africa were the better side over the course of the series and thoroughly deserved their victory."
Wickets fell at key moments on the final day with the run outs of James Taylor and Graeme Swann particularly untimely, while Vernon Philander finished with figures of 5-30.
"You can't fault the commitment, we gave it everything and this was how I expected it to pan out," Strauss added.
"Small, tight margins. They were just better than us. I don't look back on our time as number one with a great deal of fondness, as we had some tough times.
"That can be a good thing, though, as Test cricket tests you when you're number one.
"We've learned a lot and it's a shame to hand it over, but they deserve to be number one and we will come back."
Prior top-scored with 73 and admitted it was difficult to lose after getting so close to their unlikely target.
"It was set up to have a go and it almost hurts more to get that close and lose," he said. "It's very disappointing. You never think it's over as the wicket usually stays good for the five days at Lord's.
"It wasn't to be today. Congratulations to South Africa, they were brilliant all series."
What is the key reason for England's series defeat to South Africa?
The KP saga
Better South Africa team