The Knysna municipality finds itself on the brink of legal action following a dispute over a controversial debt write-off and lease agreement. The Accountability Group (TAG), a private-sector advocacy for private businesses dealing with nonpayment of bills by clients, has issued legal letters to the municipality and its acting municipal manager, challenging the legality of recent decisions involving Grey Elephant Investments (GEI), the Rex Hotel, and the Gallery Body Corporate. These decisions have also triggered a motion of no confidence in the mayor, led by the Knysna Independent Movement (KIM).

TAG’s legal representatives dispatched the letters on August 15, raising concerns about the municipality's handling of the debt write-off, which they argue was both "flawed and patently unlawful." The group is demanding a clear explanation for the deviation from established procedures and insists that no further debt be written off until proper processes, as stipulated in the municipality’s debt collection policies, are followed.

Furthermore, TAG has requested a copy of the lease agreement between the municipality and Knysna Mall, raising additional questions about transparency and governance. The group has given the municipality seven days to provide the necessary undertakings; failure to do so will result in TAG initiating court proceedings to compel adherence to legal requirements.

In a second legal notice, TAG’s attorneys, Kaplan Bloomberg & Sonn & Associates, have warned the municipality to comply with the Municipal Systems Act, the Municipal Finance Management Act (MFMA), and the policies adopted in May. Should the municipality fail to address these issues, it could face a broader legal challenge, potentially escalating tensions within the local government and further eroding public trust.

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