The KwaZulu-Natal department of health said last year that from April 2012 it would, for the first time, offer circumcision as an option to 10% of the mothers of male babies born in public hospitals.
Until now babies have been circumcised for religious or medical reasons.
The decision has raised the ire of the Medical Rights Advocacy Network's bioethics forum which says that a potential 2.3 million foreskins are at stake.
The network has written a letter to Motsoaledi, KwaZulu-Natal MEC Dr Sibongiseni Dhlomo and premier Zweli Mkhize, urging them not to go through with their plans to circumcise babies.
"Africa may be viewed as the new source of discarded virgin foreskins to sustain a multi-million-dollar industry. Discarded human foreskins are used in the cosmetics industry, in the manufacture of insulin and artificial skin," the Medical Rights Advocacy Network warns in the letter.
The network's bioethics forum also warns that although biosamples, or any "excess tissue" removed during operations must, by law, be discarded as "biohazardous waste", anyone who has access to the discarded tissue might decide to export it to participate in a multibillion-dollar industry without appropriate consent.
"It is a dangerous presumption to believe that the days of unethical conduct in research is over. In spite of the fact that the South African Human Tissue Act requires that researchers obtain a permit from the South African Ministry of Health to export human tissues, this law is difficult to enforce," the letter continues.
Poonitha Naidoo, a co-ordinator for the network, said discarded baby foreskins contain regenerative stem cells that can't be grown in a laboratory: "They use this to remove wrinkles - it can grow new skin for plastic surgery."
Naidoo said one mother had claimed that the hospital refused to give her the foreskin of her son after it was removed.
Motsoaledi's spokesman, Fidel Hadebe, said doctors have no reason to fear.
"All foreskins are incinerated. No foreskins are sold to the cosmetics industry. Doing so would be against the Human Tissue Act," Hadebe said.
But Mary de Haas, who is co-chairman of the bioethics forum and a research fellow at the University of KwaZulu-Natal's school of law, said: "There have been cases in the US where people steal them from the bins because of the commercial value.
"We are worried that pushing for circumcision means that there are vested commercial interests," she said.
De Haas said the increasing global trade in human tissues was a type of "bio-colonialism".
Hadebe said anyone caught trading in foreskins would be in violation of the law and would be dealt with accordingly.
But Naidoo insisted that the government allow members of the Medical Rights Advocacy Network to act as independent monitors, to make sure that the foreskins were being correctly disposed of.
She added that if any parent felt they had been pressured into having their baby circumcised, the network would help them take legal action.
"Hadebe can say the foreskins will be disposed of but nobody is monitoring what is happening on the ground. Anyone could sell these foreskins, from nurses through to morticians," said Naidoo.