The Durban Games would have marked the first time the event was held in Africa, and was considered a stepping-stone to an eventual Olympic Games on the only continent to have never hosted.
Some British cities, including Liverpool, have already come forward as possible replacement hosts to organize the Games which would now have to be done in a compressed timeline.
The host city, which was supposed to be Durban, did not meet the criteria set out by the Commonwealth Games Federation meaning they can no longer hold the games.
South Africa was forced to reconsider whether it could host the event due to doubts over the economic legacy of the Games and sluggish growth.
In February, South African sports minister Fikile Mbalula hinted that the city is broke and may not be able to host the event.
The baton will travel to Sierra Leone, before visiting all the nations and territories of the Commonwealth ahead of the tournament's opening ceremony on the Gold Coast, Queensland on April 4 next year.More news: Jennifer Lopez Actress now dating former baseball star Alex Rodriguez
More news: Four injured in blast in Bhopal-Ujjain passenger train
More news: Everton fans react on Twitter to Ross Barkley display against Tottenham Hotspur
Gideon Sam, president of the South African Olympic committee, told Reuters: "This is a huge disappointment for us and for the whole African continent but without the necessary government guarantees, we couldn't move on".
Durban was awarded the Games in 2015, after preferred option Edmonton, in Canada, pulled out after local opposition.
Cllr Ian Ward, deputy leader of Birmingham City Council, said: "Here in Birmingham, we are already in the advanced stages of producing a detailed feasibility study on what would be needed for a truly memorable Games in the city".
Liverpool mayor Joe Anderson said last month: "I have written to Tracey Crouch [the UK's secretary of state for sport] and assured her that we would be ready for that date".
"Besides, it would have made it increasingly hard for another potential host city if we had delayed the process any further", said Sam.