The name Knysna has appeared in various spellings since about the 1770s. It was ‘Nysna’ in one of the earliest letters from James Callander (who built a home for himself at The Heads, and who drew the first map of the estuary) to the Governor of the Cape Colony, Lord Charles Somerset - but by the early 1800s, the current spelling - Knysna - seems to have been universally accepted.

"The history of Knysna begins with a handful of Dutch settlers who hacked their way through the forests and established farms in the region. The farm; 'Melkhoutkraal', which included the entire Knysna Lagoon basin and the Heads, was first granted to Stephanus Terblans in 1770. But it was George Rex who really put Knysna on the map. This larger-than-life personality bought the Melkhoutkraal farm in 1804. He had arrived in the Cape during the first British occupation, married a widow with several kids and went on to hold a number of impressive, but minor, administerial posts with the British Government. When the Batavian regime took over in 1803, Rex decided to ignore the change in the country’s ownership and stayed on in South Africa. By all accounts, George Rex was a moody man, although he was certainly well-educated and articulate. He could also be a right quite brash, as some of his colleagues would testify, but his humour and hospitality were legendary! His personal history, however, was what made him the stuff of legend.

When George Rex grew tired of the Cape Town high-life, and he relocated to Melkhoutkraal in Knysna where he built a homestead fit for the illegitimate son of a king. From his huge estate, Rex and his progeny kept themselves busy by farming, hunting and cutting down trees. Rex also started agitating for the government (by now under British rule) to establish a harbour inside the Knysna lagoon. This would get around the logistical difficulties of building a road through the thick forests that swaddled the coast, and help Knysna become economically viable.
The problem with the harbour idea in the Knysna Lagoon was that the currents which roared through the Knysna Heads were very fierce (and they still are). This narrow channel, flanked by the two tall sandstone sentinels of the Heads, separates the placid waters of the lagoon from the wild, open sea. So, any boats that wanted to anchor in the calm, expansive estuary first had to run the formidable gauntlet of the Knysna Heads.

In 1817, after endless nagging by George Rex, the British navy sent a ship to try and navigate the passage through the heads. The experiment was not a success as the vessel hit a submerged reef and had to be run aground. A second ship was sent to salvage the first ship, and this one did manage to get through the Heads safely.

Rex was delighted, and he donated some land for a shipbuilding yard. He also built a slipway, in expectation of all the boats that would be launched into the lagoon, but the shipbuilding enterprise failed. Eventually, Knysna did get its port, and it was declared a village in 1825. The town wasn’t named after the ruling British governor - instead, it retained its original Khoikhoi name, which is thought to translate as ‘place of wood’. In 1928, a standard gauge railway line from Knysna to George was completed, and this helped precipitate the closure of the Knysna port in 1954. The once-abundant natural beauty of Knysna has actually been heavily compromised by the rampant development of the town. Houses are being built further and further up the mountain slopes, and the vast informal settlement grows. One of the Knysna Heads is thoroughly pockmarked with over 100 large holiday homes, and this has destroyed much of its wild beauty. Ironically many of these houses were destroyed in a raging forest fire in 2017."    by: David Fleminger

Geolocation
23° 25.2", -34° 2' 20.4"
References
http://southafrica.co.za/history-knysna.html