The study critically evaluates the sustainability of informal settlements in terms of smart growth principles. There is an irony that informal settlements have more of the ideal attributes of smart development, including mixed-use development, high densities, compact affordable housing, modal accessibility, and dense local employment opportunities, than sprawling, low-density single-use developments in surrounding formal developments. Yet, despite their smart characteristics, these informalised settlements are not regarded as ideal spaces to live in due to their informal nature and thus are regarded as unsustainable modes of living. This study critically investigates these assumptions, analysing how informal mixed-use spaces are produced, organised, and regulated organised outside formal planning in a customary land use management system in Cape Town, South Africa, and whether this mode of urbanism is smart, i.e., sustainable. The research results indicate that customary self-regulation of informal settlements creates very liveable, polymorphic spaces in the marginalised townships despite the severe lack of resources. Its smart characteristics are not for aesthetic reasons but to make space functional and personal for the residents. However, the unregulated nature of this new mode of urbanism also limits the accumulation of wealth within the township, and it creates dangerous and unhealthy living conditions for residents in terms of litter, noise, flooding, fire risks, environmental degradation, and anti-social behaviour, especially in public areas not adequately regulated by customary regulatory bodies. [ABSTRACT FROM AUTHOR]