Impact Africa and Shell, the UK-headquartered energy giant, have lost a Constitutional Court challenge over an offshore exploration right on South Africa’s Wild Coast, closing the door on efforts to revive the disputed permit through another public participation process.

In a judgment delivered on August 14, 2026, the Constitutional Court set aside an earlier Supreme Court of Appeal ruling that had allowed the companies to pursue a third renewal of the exploration right, originally granted in 2014.

Court rejects sunk costs as basis for flawed permit

The ruling ends a five-year legal battle over the permit and comes just two weeks after Shell agreed to sell its wholly owned subsidiary BG Cyprus Limited to Hungarian oil and gas group MOL for up to $720 million. The Constitutional Court’s decision means Impact Africa and Shell can no longer rely on a fresh consultation process to remedy the legal defects that undermined the original exploration right.

At the centre of the dispute was the approximately R1.1 billion ($68 million) that Shell and Impact Africa had already spent on the exploration project, as the Energy companies wanted to map the seabed off the Eastern Cape coast to see if oil and gas reserves existed.

The Supreme Court of Appeal had relied partly on that investment when it suspended the effect of its order setting aside the exploration right, allowing the companies an opportunity to pursue a fresh public participation process before seeking another renewal.

Court rejects renewal of flawed exploration right

The Constitutional Court accepted that the commercial consequences of a court order can be relevant when determining an appropriate remedy.

However, the majority found that consultation conducted at the renewal stage could not cure fundamental defects in the original process that resulted in the exploration right being granted.

The court found that the shortcomings extended beyond inadequate public consultation and included the manner in which climate change, the Integrated Coastal Management Act and the precautionary principle were considered when the original right was granted.

The approximately R1.1 billion already invested in the project therefore could not, by itself, preserve an exploration right that had been granted through an unlawful process.

Wild Coast exploration process faces final setback

The Constitutional Court’s majority judgment, delivered by Justice Jody Kollapen, distinguished between taking commercial prejudice into account and allowing sunk costs to determine whether an unlawful administrative decision should remain in effect.

The court’s reasoning means that companies cannot rely simply on substantial investments already made to keep a regulatory approval alive when the underlying decision-making process was legally defective.

The majority also highlighted the unusually long history of the dispute, noting that the litigation had been underway for about 13 years and that the legal and regulatory environment had changed significantly during that period. The judgment further noted that Impact Africa had contributed to the unlawfulness identified in the original process.

South Africa’s exploration regime faces greater scrutiny

For the Department of Mineral Resources and Energy, the ruling raises the standard for how exploration rights must be processed and defended.

The decision indicates that the broader economic case for expanding domestic gas supplies or attracting investment into South Africa’s offshore resources will not substitute for a legally sound administrative process.

For international oil and gas companies, the ruling does not make South Africa uninvestable. Instead, it adds another layer to project risk, with the quality of regulatory approvals, environmental assessments and public participation likely to carry greater weight alongside geological prospects, commodity prices and commercial returns.

The Wild Coast case therefore leaves a broader message for South Africa’s upstream sector: substantial capital investment may strengthen the commercial case for a project, but it cannot repair a regulatory process that was unlawful from the outset.