JOHANNESBURG, November 29, 2013 (AFP) - Schwartzel, who won the title for a second time by 12 shots last year, had started the day three shots behind overnight leader Madsen, who hit a stunning seven-under-par 65 on Thursday but could only manage a one-under 71 on Friday.
The pair will tee off last at Leopard Creek Country Club on Saturday on eight under par.
"Last year was quite a high standard, but I must say the course is playing more difficult," Schwartzel, 29, told europeantour.com after his bogey-free round.
"Towards the end I hit the ball a little bit better, but in the beginning I wasn't very comfortable with the whole thing.
"It's just one of those courses where the targets I look at are all in the right places and also, I've got comfortable on these greens."
England's Ross Fisher and another Dane, Soren Hansen, both matched Madsen's Thursday performance to move into a share of third place, one shot off the lead.
South Africa's Tyrone Van Aswegen and Richard Finch of England share fifth place two shots back after respectively carding rounds of 70 and 68.
Leading scores after the second round of the Alfred Dunhill Championship on Friday at the par-72, 6,665-metre Leopard Creek Country Club (GBR & IRL unless stated, par 72):
136 - Charl Schwartzel (RSA) 68 68, Morten Orum Madsen (DEN) 65 71
137 - Ross Fisher 72 65, Soren Hansen (DEN) 72 65
138 - Richard Finch 68 70, Tyrone Van Aswegen (RSA) 70 68
139 - Sihwan Kim (NOR) 70 69, Michael Hollick (RSA) 69 70, Romain Wattel (FRA) 70 69, Victor Riu (FRA) 68 71, Danny Willett 69 70
140 - Titch Moore (RSA) 71 69, David Drysdale 68 72, Hennie Otto (RSA) 69 71, Niclas Fasth (SWE) 72 68, Ricardo Santos (POR) 66 74, Jorge Campillo (ESP) 70 70, Garrick Porteous 71 69, Graeme Storm 72 68
141 - Haydn Porteous (RSA) 72 69, Jens Dantorp (SWE) 70 71, Simon Dyson 72 69, Ryan Cairns 70 71, Alexander Levy (FRA) 73 68
142 - Brendon De Jonge 73 69, Magnus A Carlsson (SWE) 70 72, Jaco Ahlers (RSA) 71 71, Jaco Van Zyl (RSA) 70 72, Simon Wakefield 74 68, Jbe Kruger (RSA) 74 68, Tyrone Ferreira (RSA) 72 70, Francois Calmels (FRA) 74 68, Charl Coetzee (RSA) 70 72, Christopher Doak 69 73