Background The disposal of greywater is a challenge for informal urban settlements that do not have a reticulation system to collect the wastewater they generate. Greywater, which includes domestic wastewater, represents a potential resource that can alleviate water stress if efficiently managed. This study aimed to provide sustainable disposal and potential reuse of greywater produced using informal settlements in Cape Town, South Africa. Greywater has the potential to contribute significantly to food security in such settlements by providing a source of both irrigation water and toilet flushing. Methods A combination of desktop research and interviews was employed to gather and analyze the data. A total of 69 questionnaires were administered in the study, and greywater management practices were investigated. Results The findings showed deficiencies in the sustainable disposal of greywater from households. To understand the volumes of greywater generated from a household, a model has been proposed in the study, as there has been a lack of focus on making predictions that quantify the volume of greywater recovered from these households. Conclusions In the context of sustainable development, water management, and considering the scarcity of water resources, particularly in semi-arid regions, the use of treated greywater is an alternative method that can reduce the burden of withdrawals. The study has demonstrated that socio-economic status and education level has reciprocal outcomes on the communities’ understanding of environmental issues. Eliminating inappropriate disposal and providing means to sustainable reuse of greywater effluent is the key.