Firstly, your friend is right. Our courts do create law, but not necessarily in the way that you understand our Government to do so through the passing of legislation. Our courts rather do so through the interpretation of our legislation and applying and developing our common law rules.
Our courts are governed by a principle known by its Latin term “stare decisis” which essentially means “to stand by a prior decision.” For our courts, this principle means that a court must follow or stand by a prior court decision of higher authority, unless that decision is clearly wrong. Our courts must therefore rely on the decisions taken by courts of a higher jurisdiction or of the same jurisdiction to them in respect of similar facts or legal questions. For example, a High Court must follow the prior decision of our Supreme Court of Appeal or Constitutional Court or even of a High Court in the same jurisdiction as it in matters with the same facts or questions of law. In this way, ‘new law’ is essentially created by our courts as these prior decisions must be followed. Decisions can be referenced and researched in recorded law reports containing our court judgments, thereby contributing to an environment of legal certainty and consistency, very necessary to a country which prides itself on the importance of the rule of law.
This does not however mean that previous decisions are absolute and can never be changed. The law is and must also be organic and change with the times and this demands that previous decisions can and must be changed from time to time, albeit not willy nilly.
For a previous decision to be overturned however, the previous decision must be seen to cause injustice or be inefficient or difficult to implement. Likewise if there has been new legal development (such as new legislation) or a previous decision appears to be unconstitutional, a previous decision can be overturned. But, until a court is satisfied that the previous decision is wrong, the principle of stare decisis holds that a court cannot overturn a previous decision. A lower court can also not overturn the decision of a higher court, to again provide consistency and avoid arbitrariness in our law.
The principle of stare decisis is therefore vital to our law and creates consistency and transparency in our legal system. At the same time our law has enough ability to evolve so that our law can remain relevant as our society grows and places new demands on our legal system.