The SA Institute of Race Relations (SAIRR) study found that adoptions were not a frequent choice among families.
"A lot of orphans are looked after by their extended families or family friends in a private, informal arrangement known as kinship foster care," the SAIRR said in a statement.
"This type of arrangement is widely practised in South Africa, even though it is not ordered or regulated by any statute or legal body."
It said Statistics SA estimated that 1.4 million children lived in such households.
The study found the number of orphans increased by 29% between 2005 and 2009, from just over four million children to 5.2 million.
In the same period adoptions decreased by 52% and foster care grants increased by 72%.
The statistics were based on data from the education department.
"Formal foster care comes with a financial incentive. The foster care grant is currently R770 a month. Many people opt to foster a child rather than adopt one."
Adoption required the family to be able to provide for the child’s needs, both financially and otherwise.
"No financial assistance is provided by the government. In addition, the adoption process is a lengthy and demanding one, which often acts as a deterrent to prospective parents."
SAIRR researcher Lerato Moloi said this was not good news for the increasing number of orphans in the country.
"The Actuarial Society of SA estimates that by 2015, there will be more than 5.5 million orphans. Some 32% of these will be maternal, 56% paternal, and 12% double orphans."