Knysna's lagoon is one of the country's most valuable natural assets and its tourism economy depends on it. In April 2024 the Western Cape government gave notice under s139 of its intention to intervene after a diagnostic found "regressive service delivery" in wastewater and solid waste. The ANC-led council did not adopt the support plan. A R9.7 million Water Resilience Grant was allocated. In May 2025 the main domestic water pump failed.

On 26 June 2025 Minister Anton Bredell gave notice of intention to dissolve the council: "no other option". Municipal manager Lulamile Mapholoba said the council was "preparing a response within the stipulated timeframe of 10 calendar days"; ANC caucus leader Khalid Sayed said the move "reflected DA concerns about coalition stability rather than governance issues". On 12 September 2025 the Provincial Cabinet dissolved the council under s139(1)(c), citing an inspection of 67 sewer pump stations that found 11 fully functional, 24 non-functional and 56 of 136 required pumps working, raw sewage in streets and waterways, and chronic water outages. An administrator took executive and legislative authority pending an election within 90 days. It was the first dissolution of a municipal council in the Western Cape's history.