The move follows the company's announcement earlier this week it was investing $40 million (€33.6m) in a gum research centre in the US.
Cadbury wants to go head to head against Wrigley for a bigger share of the thriving chewing gum market. The company is also divesting itself of parts of its beverages business.
Cadbury will acquire South Africa's leading gum business from Dan Products in Botswana.
The manufacturer produces gum under the Stimorol and Dirol brands. Cadbury said the business achieved sales of about £9 million in 2005, and had an operating profit of £3 million.
Management say the acquisition will reinforce the company's presence in the South African market and also act as a platform for expansion in other markets in the southern region of the continent.
The cash deal is subject to clearance from the South African competition authorities and expected to be completed in the first half of 2006.
Earlier this week Cadbury announced details of a gum research centre to be based in the US.
The centre will be responsible for developing new products for the company's global gum business.
Cadbury will recoup the outlay for its gum expansion with the sale of its South African drinks business Bromor Foods.
The company sells branded concentrates and other soft drinks in the South African market and had 2004 sales of £65 million and an operating profit of £6 million.
Cadbury expects to complete an agreement for the sale of Bromor, which employs about 900 people, in the first half of the year.
The decision to sell its drinks business in South Africa follows the sale of Cadbury's European beverages unit.
Earlier this year the EU cleared the takeover of Cadbury Schweppes' European drinks business by a private equity group.
The £1.2 billion sale includes brands such as Orangina and Oasis.
The company said the sale would allow it to repay debt and further focus on its global confectionery and drinks businesses in other parts of the world.