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Kallis has called time on his international career, which began back in 1995 and saw him represent South Africa more than 400 times in all three formats of the game.
However, after a disappointing recent tour of Sri Lanka, he has abandoned his bid to play at a sixth World Cup next year.
Smith, who captained South Africa between 2003 and 2014, says he admires Kallis' honesty in deciding to retire now.
"If you have been playing for a long time you have the ups and downs and obviously it gave him a chance to have perspective," he said.
"I know he struggled with his body a fair amount. I think he realised that maybe the World Cup is a bridge to far for him.
"But, I think that was always the good thing about he was honest and I think that honesty shone through in the end."
And Smith, who himself played 117 Tests, 197 One-Day Internationals and 33 Twenty20 Internationals, says that Kallis' absence leaves a huge hold in the South African setup.
"I don't think that there is a like-for-like substitution for Jacques Kallis," he said.
"I think it is probably an area that we need to focus in terms of bringing all-rounders through in South African cricket after the Pollocks, the Kluseners, the Kallis' and so on.
"We don't really have huge amount of guys coming through. You've got Ryan McLaren there now. It is an area that hopefully kids will now really aspire to want to be a Jacque Kallis.
"It is hard work to be able to bowl and bat and catch. It requires a really special human. But, I think it gives the guys enough time tactically to find the method.
"There's is enough ODI cricket before the World Cup and I think Jakes (Jacques) hasn't just done it at last minute.
"He's obviously, I think he really knowing and speaking to him he really wanted to go to that World Cup and obviously now he realises that it is a bridge too far.
"But, I think it gives the guys enough time tactically with enough ODIs to say 'ok this is how we're going to replace Jakes, we need to carry an extra bowler here. Go the extra batter.'"
"So those are important tactical decisions for AB (de Villiers) and (head coach) Russell (Domingo)."
Meanwhile, Cricket South Africa (CSA) chief executive says that even if South Africa don't have a replacement lined up for Kallis, they have the strength in depth to win without him.
"There is never a good time to leave, there is never a wrong time to leave, but I think Jacques knew and as he said in his statement that he felt in Sri Lanka the time was upon him to move on," he commented.
"And I think it is a brave decision. He really wanted to play in the World Cup. He was committed, he had done everything that we had asked of him, but I think that the body at the age that he has arrived at will tell you the story.
"There is no doubt he was a pillar in the Proteas team. He was a phenomenal player. His records speak for himself.
"He is the only player who scored 11,000 plus runs in both Test and ODI cricket. So, he leaves a big void, but we are very fortunate in that we the team has grown beyond that.
"We have seen the performances recently in Sri Lanka, so we are fortunate to be blessed with such fantastic players."
Video courtesy of SNTV
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