Oosthuizen, the defending Africa Open champion, had an eagle and nine birdies in an 11-under-par 62. Richard Sterne set the East London Golf Club record with a 61 in 2008.
Oosthuizen is at 11-under 131 after 36 holes, two strokes clear of four players, including first-round leader Thomas Aiken.
Aiken shot 4-under 69 Friday and is tied with Retief Goosen (68), Jaco Ahlers (68) and Tjaart van der Walt (64) at 13-under.
Magnus Carlsson, who ran off an 8-under 65 in the second round, is alone in sixth at 12-under with four more players in at 11-under 135.
Oosthuizen opened Friday's play at the ninth hole with a birdie. After three pars he carded four birdies over six holes to get to 5-under after 10 holes.
He added birdies at Nos. 1 and 3 and lipped out an eagle chip at the fifth hole. But he was able to drop a 50-foot putt for a 2 at the par-4, 308-yard sixth hole, a hole he had a 6 on Thursday. Oosthuizen finished his round with a 25-foot birdie putt at 8.