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Phungwayo was withdrawn from the Bafana Bafana squad after scans revealed that his injury would require weeks of rest to heal.
"We have no option but to send him home so he can begin with rehabilitation and we can welcome the new player in," Bafana coach Shakes Mashaba said.
"We would have loved to be with him to play in the tournament, but because of the injury we can't. But going back will also help him to recover speedily."
The defender injured his knee during Bafana's last training session in Johannesburg on December 30.
He missed last weekend's international friendly match against Zambia which South Africa won 1-0 at Orlando Stadium, as he was undergoing rehabilitation. He also missed the two training sessions that Bafana had in Libreville, Gabon.
Meanwhile, Andile Jali and Thabo Matlaba were declared fit to play by the Bafana medical team.
Jali arrived in camp in December with a knee injury and had now fully recovered. Matlaba was stretchered off in the clash against Zambia after complaining of cramps which were caused by low levels of fitness. He has been getting extra training in camp.
