Richmond's newly-elected African National Congress (ANC) mayor Bheki Mtolo, allegedly spent R250 000 - or 10 percent of the town's budget - on a new car.
This led to scores of "concerned residents" taking to the streets to demand his resignation on Saturday.
The residents picketed outside the town's council offices, demanding that Mtolo be forced to resign.
Their memorandum charged that Mtolo was living in a council house and that expensive renovations had been made to the house especially for him.
They added that council houses were for council employees, not for councillors.
The protesters also called on the newly-elected deputy mayor, Nozipho Ngubo, to be fired because, they charged, she was "climbing on the gravy train".
In response, Mtolo said the allegations were groundless.
"The people who protested feel that I am an outsider and that I live outside Richmond.
"However, I live in Hopewell which is part of Richmond.
"The protesters regard me and the deputy mayor as outsiders and that the party nomination lists were manipulated. This is not true.
"However, I will be calling an exco meeting this week to formulate a response.
"I will then face the full council for a decision," said Mtolo.
He said he and Ngubo were being wrongly accused and that the protest was all part of a smear campaign.
The Speaker of the Town Council and the former mayor, Andrew Ragavaloo, said the petition had been supported by 700 signatures.
"We have accepted the memorandum and the petition, and when the council sits, we will discuss the matter," said Ragavaloo.
A Democratic Alliance councillor, Bryce Biggs, said the council had to address a number of issues which the residents were upset about concerning the running of the town.
"There is a full range of concerns that falls within the council's competency which must be dealt with as a matter of urgency," said Bryce.
Ragavaloo denied that there was a split within the ANC's ranks in the town.
The Richmond council is controlled by the ANC.