Twice major champion Olazabal, who along with the late Seve Ballesteros forged the most successful Ryder Cup partnership in the history of the competition, said standards were dropping in his native country.
"It's true that for a while we had great players in Spain but we are struggling to see a new generation coming through," Olazabal told reporters ahead of this week's inaugural Tshwane Open.
"You have a lot of great players, major winners, in this country. In a way I envy that."
Ballesteros, who died in 2011 at the age of 54 after a long battle with brain cancer, and Olazabal blazed a trail for Spanish golf.
Shotmaker extraordinaire Ballesteros bagged the last of his five majors in 1988 before Olazabal assumed the mantle, winning the U.S. Masters in 1994 and 1999.
Sergio Garcia burst on to the scene at the 1999 U.S. PGA Championship when he finished second behind Tiger Woods but a lipped-out putt on the 18th at Carnoustie in 2007 is as close as he has come to winning one of the game's four coveted trophies.
In Monday's world rankings Spain had two players, Garcia (17) and Gonzalo Fernandez-Castano (32) inside the top 50 with Rafael Cabrera-Bello just outside at number 59.
In contrast South Africa had Louis Oosthuizen at five, Charl Schwartzel (14), Ernie Els (24), Branden Grace (30), George Coetzee (42) and Tim Clark (48) with Richard Sterne at 52.
Four-times major champion Els won last year's British Open while Schwartzel triumphed at the 2011 Masters and Oosthuizen claimed his first major at the 2010 British Open on the iconic Old Course at St Andrews.
"You have a lot of great players, no question. For whatever reason this country is able to deliver great players," said Olazabal.
"The level here is much better than in Spain."
New Zealander Michael Campbell, the 2005 U.S. Open champion, said greats like nine-times major winner Gary Player were responsible for the burgeoning state of the game in South Africa.
"There must be something in the water here - it's incredible," said the world number 231.
"There are so many wonderful players coming out of South Africa now. It's a tribute to the guys who paved the way such as Gary Player, Ernie Els and Retief Goosen."
Goosen won the U.S. Open in 2001 and 2004 before Trevor Immelman joined the long line of South African winners with his 2008 Masters triumph.(Writing by Tom Pilcher in London, editing by Tony Jimenez)