Afridi, who had entered into a agreement with the Knights in the tournament during a recent visit to South Africa, said he had decided to spend the time with his family.
"I have decided not to play in the South African league because I want to spend more time with my family," he said.
"We have the Asia Cup and World T20 Cup coming up early next year and before that I also wanted to take a break from the game."
Afridi is also being seen as a possible candidate to take over as the national T20 captain if the Pakistan Cricket Board decides to replace Muhammad Hafeez before the World T20.
PCB's acting Chairman, Najam Sethi told reporters in Karachi the other day that there was pressure on Hafeez to retain his place in the national T20 team and the selectors would decide whether he should continue as captain.