The Constitutional Court yesterday made the order after the Durban University of Technology student's legal team reached a settlement with the prosecution that he would be released on R250 bail, subject to conditions.
Khanyile had been in custody since his arrest on 27 September last year during student protests. He was held on eight charges, including public violence, illegal gathering and inciting violence.
He approached the court on an urgent basis seeking leave to appeal against a Supreme Court of Appeal ruling that dashed his hopes of getting bail.
Among the bail conditions are that he does not intimidate staff at the Durban University of Technology.
Earlier, Chief Justice Mogoeng Mogoeng had asked the student activist's counsel, advocate Dali Mpofu SC, why it was necessary to keep Khanyile in prison.
"The only fact that stands out is that this student had to be made an example of.
"The prosecutor said there was an order from the president to clamp down on protesting students," Mpofu said.
About 1,000 EFF supporters, student leaders and students protested outside court while proceedings were under way, with the "Free Bonginkosi" committee vowing to make the country "ungovernable" if Khanyile was not released.
Addressing the crowd after the ruling, EFF leader Julius Malema said Khanyile did not belong among criminals because he was "fighting for a just cause".
"We came to defend the jailing of an innocent African child."
He said the state had tried to justify why Khanyile should be locked up. But the state had started negotiating a settlement only after they had realised that they did not have a relevant case.
Malema said it had cost the party R500,000 to get Khanyile released on bail pending trial.
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