There have been angry scenes outside court after a judge threw out the case against Shrien Dewani, who was accused of plotting to murder his wife Anni on their honeymoon.
Judge Jeanette Traverso said prosecution arguments had "fallen far below" the level needed to secure a conviction, paving the way for the British businessman's acquittal.
Mr Dewani, of Westbury-on-Trym near Bristol, denied arranging the murder, and said his 28-year-old bride, whose maiden name was Hindocha, was killed during a botched carjacking in Cape Town in November 2010.
Anni's sister, Ami Denborg, told Sky's Alex Crawford: "The justice system has failed us."
In a statement outside court, the Hindocha family said: "The knowledge of not knowing is going to haunt us for the rest of our lives."
They later added that Anni would not have married Mr Dewani "if she had known about his secret sex life".
Mr Dewani, who is now free to return to the UK, breathed a large sigh of relief as the judge cleared him.
Members of the 34-year-old's family wept and embraced as he quickly left the dock.
Anni's family bowed their heads as shouting was heard from the public gallery.
The family say they will review the case with their lawyers to see if they can file a lawsuit against Mr Dewani in the UK.
Sky News understands Mr Dewani will return to the UK on Tuesday.
The state's key witness, cab driver Zola Tongo, said Mr Dewani paid him to hire two men to carry out the murder.
The prosecution claimed Mr Dewani, who is bisexual, wanted to get out of the relationship and the men carried out the killing for 15,000 rand (£830).
Tongo, Mziwamadoda Qwabe and gunman Xolile Mngeni were convicted for their part in Anni's death.
Qwabe is currently serving a 25-year sentence.
Mngeni was serving life for firing the shot that killed Mrs Dewani, but died from a brain tumour in October.
Giving her ruling on the application to dismiss the case, Judge Traverso said the evidence from the men was "so improbable, with so many mistakes, lies and inconsistencies you cannot see where the lies ended and the truth begins".
She added that the only reason not to grant the application would be in the hope that Mr Dewani would implicate himself during his testimony.
However, to do so would be a "manifest misdirection", Judge Traverso said.
South African National Prosecuting Authority spokesman Nathi Ncude denied the case had collapsed because of "shoddy" police work.
He said: "The judgment centres around evidence that was given by three people. Nothing has been said about the police, nothing was said about how the prosecution could have done better.
"The fact of the matter is that we were relying on people who were themselves involved and implicated in the case."
The ruling ends a four-year wait for Mr Dewani and his family to clear his name, which has included spells in mental health units, allegations about his private life and an extradition battle.
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