The acknowledgment comes amid criticism from world football governing body FIFA, which fears stadiums for the prestigious tournament and the scene-setting 2009 Confederations Cup would lack adequate local support.
"My reading of the situation at this stage is that we are not putting enough resources for marketing these two important events to South Africans," cabinet spokesman Themba Maseko told journalists.
"It's not just money... It's a lot of planning and coordination, but I think money is going to be at the centre of whatever interventions we put in place," Maseko said, without elaborating.
He added that major sponsors of the World Cup were also not doing enough to promote the tournament, being held in Africa for the first time, among South African fans.
However, some sponsors will start advertising the World Cup on their products, such as drinks cans, over the next few weeks, Maseko said.
On Tuesday, FIFA general secretary Jerome Valcke criticised South Africa's lacklustre approach, saying he had not seen a "single promotion" for the two tournaments.
Approximately 170,000 tickets have been sold for the Confederations Cup, featuring Brazil, Spain and Italy among the eight teams taking part, from June 14-28.
"All evidence is indicating that the local (World Cup) Organising Committee, the government, host cities, we are all not doing enough to market this tournament to South Africans and so that is the challenge," Maseko said.
