Grace will take a four-stroke advantage over Dane Thorbjorn Olesen into the closing 18 holes after a three-under-par 69 at Carnoustie - much the toughest of the three courses used for the celebrity pro-am - lifted him to 20 under.
"He's good enough to win an Open - he's that good," Els, the current Claret Jug holder, said as the 24-year-old continued to dominate an event he has led since his opening 60 at Kingsbarns on Thursday.
Even with a 65 at St Andrews Els is 12 shots adrift, but seeing another product of his Foundation blossom so spectacularly this season fills him with pride.
Louis Oosthuizen and Charl Schwartzel have already won majors, and since coming through his fifth visit to the European Tour qualifying school last December, Grace has won four times and leapt inside the world's top 50 from outside the top 300.
"I remember winning the (2007) South African Open and he was top amateur," said Els, who lost to him in a play-off for the Volvo Champions title in January.
"He's always been a quality player and he's a world contender now."
He finds it no surprise that the Pretoria golfer is excelling this particular week.
"His game is so suited for links golf - he hits those low bullet drives and he can really putt," Els said.
Grace did not have everything go his way in the third round. After a hat-trick of birdies he double-bogeyed the 472-yard 15th, but as he picked up another shot on the last Olesen double-bogeyed the 17th at Kingsbarns.
Swedes Fredrik Andersson and Alex Noren are in third spot, while Scot Stephen Gallacher, whose only Tour victory in nearly 400 starts came in this event eight years ago, produced a spectacular finish to be in the group on 14 under.
Gallacher sank a "totally blind" 200-yard five-iron for an eagle two at Kingsbarns' 17th and then birdied the last for a 65.
Two of the three returning Ryder Cup players made the cut, but it will disappoint locals that the one to miss out was Paul Lawrie.
A 68 for three under at St Andrews was never likely to be enough for him - "I putted like an idiot," he said afterwards - but Martin Kaymer's 69 took him to six under and Peter Hanson matched that round to squeeze through on five under.
Although Jose Maria Olazabal's four assistants - Darren Clarke, Paul McGinley, Thomas Bjorn and Miguel Angel Jimenez - all failed to make it, lone American Dustin Johnson, winner of all his three games in the Chicago defeat, is alongside Kaymer thanks to a 67.
Grace said: "I didn't play particularly well. There were loose shots here and there, but this course mentally does it to you.
"I kept fighting, got it around and finishing with a birdie is a bonus.
"Everybody calls it 'Car-nasty' (a name given during the 1999 Open when the rough was some of the worst ever and a 19-year-old Sergio Garcia finished last on 30 over) and it showed you still have to hit good shots.
"I've dreamt of picking any trophy up on that bridge on the 18th (at St Andrews), so maybe this time tomorrow [Sunday] it happens."