His seven-under 65 put him one shot ahead of South African Allan Versfeld and Portuguese Ricardo Santos, who eagled the last for a share of second place.
The 25-year-old Madsen was a surprise winner of last week's opening 2014 European Tour event and his form held with eight birdies and one bogey on the picturesque Leopards Creek course on the border of South Africa's Kruger Park.
Last year's Alfred Dunhill Championship winner, South African Charl Schwartzel, who romped home by 12 strokes for the third-largest winning margin in European Tour history, is tied in third after a four-under-par 68.
He shares the position with Frenchman Victor Riu, Englishman Richard Finch and Scot David Drysdale.
Twice major winner John Daly hit a par-72 on his return to South Africa, where he had played the Sunshine Tour from 1987 to 1990 before his U.S. PGA Championship success in 1991.
It is the 47-year-old American's first tournament since elbow surgery earlier in the year.
- Sports & Recreation
- South Africa