The 2001 British & Irish Lion, who last appeared for Wales under Steve Hansen in the 2002 defeat to New Zealand, impressed Ruddock after being called into the squad as injury cover.
James starts on the right wing and is amongst 10 changes that Ruddock has made to the first-choice Wales side that was beaten by the All Blacks on November 5.
Two of those changes are injury-enforced with James replacing Kevin Morgan (ankle) and Luke Charteris starting in place of lock Brent Cockbain (hamstring).
But otherwise Ruddock has performed radical surgery on the side that was beaten 41-3 by the All Blacks.
Lee Byrne starts at full-back with captain Gareth Thomas moving to outside centre in place of Mark Taylor.
Thomas is partnered in midfield by Sonny Parker, who comes in for Ceri Sweeney, while Lions tourist Gareth Cooper takes over from Mike Phillips at scrum-half.
In the pack, Worcester prop Chris Horsman has recovered from an ankle problem to start ahead of Adam Jones and hooker Rhys Thomas has ousted Mefin Davies, while Lions flanker Martyn Williams returns with Jonathan Thomas slipping to the bench and Colin Charvis moving to the blind-side.
Ruddock explained: "Our rationale has been to go for a team that has the potential to play the exciting brand of rugby that we associate with the Welsh team and a team that can adopt a strong defensive attitude when the Springboks have the ball.
"We may have lost a few players to injuries but we believe we have an exceptionally strong team here with a good mix of experienced players and some great young prospects.
"We obviously had decisions to make at centre, full-back and wing, but we feel we have come up with the right balance for this game.
"Dafydd brings a wealth of experience to the table, along with international size and physique, he also has the kind of attack defensive qualities which are the keys to building a performance against a combative South African outfit on Saturday," said Ruddock.
"We've been keeping an eye on him and, whilst we felt his time at Harlequins didn't bring out the best in him last season, his class has shown through and he's been more like his old self since returning to the Scarlets.
"Lee offers us a big left boot to compliment Stephen Jones as a kicking option and, most impressively, he has come into the side in difficult circumstances and slotted in extremely well to the international environment and not looked out of place."
Wales are now without six injured players with Cockbain, who underwent surgery on Sunday to re-attach a hamstring he injured against Fiji, joining Gavin Henson, Dwayne Peel, Tom Shanklin, Ryan Jones and Gethin Jenkins on the sidelines.
Dafydd Jones' ankle injury will also rule him out of next week's game against Australia.
Wales team to play South Africa at the Millennium Stadium on Saturday:
L Byrne (Llanelli Scarlets); D James (Llanelli Scarlets), G Thomas (Toulouse, capt), S Parker (Ospreys), S Williams (Ospreys); S Jones (Clermont Auvergne), G Cooper (Newport Gwent Dragons); D Jones (Ospreys), R Thomas (Cardiff Blues), C Horsman (Worcester), L Charteris (Newport Gwent Dragons), R Sidoli (Cardiff Blues), C Charvis (Newcastle), M Williams (Cardiff Blues), M Owen (Newport Gwent Dragons).
Replacements: M Davies (Gloucester), A Jones (Ospreys), I Gough (Newport Gwent Dragons), J Thomas (Ospreys), M Phillips (Cardiff Blues), C Sweeney (Newport Gwent Dragons), M Watkins (Llanelli Scarlets).