Zuma had lodged a challenge at the court in Bloemfontein after a lower court decided in 2016 to reinstate charges that were previously dropped by prosecutors. The National Prosecuting Authority must now decide whether to pursue a prosecution.
“The reasons for discontinuing the prosecution… do not bear scrutiny,” said Supreme Court judge Eric Leach, delivering a ruling that the presidency described as “disappointing”.
The opposition Democratic Alliance party has fought since 2009 to reactivate 783 charges relating to controversial post-apartheid military contracts that have dogged Zuma for much of his time in government.
The president, who is accused of corruption, fraud, money-laundering and racketeering, has always insisted he is innocent of the allegations that date back to when he was rising through the African National Congress (ANC) party.
Zuma, who is on an official visit to Zambia, could now contest the ruling by appeal to the Constitutional Court.
“The decision of the Supreme Court of Appeal today, whilst disappointing, was much anticipated,” said a statement from his office.
Zuma and other government officials were accused of taking kickbacks from the $5 billion (4.2 billion euros) purchase of fighter jets, patrol boats and other arms manufactured by five European firms, including British military equipment maker BAE Systems and French company Thales.
In 2005 Zuma’s former financial adviser Schabir Shaik was convicted for facilitating bribes in exchange for military hardware contracts and sentenced to 15 years in prison. He was later released on medical parole.
– ‘Much more vulnerable’ –
Charges were first brought against Zuma in 2005 but dropped by prosecutors in 2009 before their reinstatement some seven years later.
Constitutional expert Lawson Naidoo described the Supreme Court judgement as a “significant blow” for Zuma.
“He may petition the Constitutional Court but it appears that he has no legal basis for that after his legal team conceded that the decision to drop the charges was indeed irrational,” he said.
The Supreme Court heard arguments last month against reinstating the charges, but in an unexpected twist Zuma’s lawyer agreed that the decision by prosecutors to drop them in the first place was irrational.
The Supreme Court ruling could intensify calls for Zuma to resign and cast a shadow over a conference of the ruling ANC party in December, which will elect his successor.
The case is the latest in a string of political and legal scandals that have haunted the president but failed to shake his grip on power.
The Democratic Alliance (DA), which hopes to make major gains against the ANC in 2019 elections, hailed the ruling.
“Today’s judgement is a win for justice, the rule of law, and for South Africa,” said its leader Mmusi Maimane.
“The charges now stand, and a court of law must hear this matter.”
The ANC party, which has lost popularity since Nelson Mandela led the fight to end apartheid, maintained that Zuma had not been found guilty of any offence.
“You cannot be found guilty by the court of public opinion…the national prosecution authority must now lead the charge on what’s the next step to take,” said party spokesman Zizi Kodwa.
In 2016 Zuma was ordered to repay $24 million of public funds for upgrades to his personal residence that judges said showed he had disrespected the constitution.
“He’s going to try to fight back, but I think it will empower some within the ANC… to say maybe this is a deal we can give you to get out,” said political analyst Ralph Mathekga.
“He’s going to become much more vulnerable.”
Zuma, 75, is due to step down as head of the ANC party in December, and as national president before the 2019 general election.