On 28 January 1935, the administrative centre of the Caprivi Strip was moved from Schuckmannsburg to Katima Mulilo. This date is assumed as the foundation date of Katima Mulilo. The regional office, the only brick-and-mortar building at Katima Mulilo at this time when the area consisted exclusively of pristine forests, was built under a giant Baobab situated near today's SWAPO Party regional offices. In present times the tree is known as the Toilet Tree because of a rest room carved into it.
Katima Mulilo was very sparsely populated at that time. It had a missionary school run by the Seventh�day Adventists, and the small settlements were connected only by sleigh tracks. Without any roads nor other infrastructure it was difficult to administer the Caprivi Strip from here. The South African administration therefore decided to shift the regional office again, this time to Pretoria, in 1939. Given its proximity to important transport routes, particularly the railway bridge at Victoria Falls, the location of Katima Mulilo became strategically important in the Second World War which broke out soon afterwards. All military supplies, people, and goods had to be flown in. The town's first car came in 1940 and belonged to the air strip operator.
In 1940, William "Bill" Finaughty established the first shop in the Caprivi Strip in Katima Mulilo; the settlement that surrounded the shop was subsequently named for him. In the 1950s, transport on the Zambezi River was established and allowed connection to the train service at Livingstone. The M'pacha Airfied, today Katima Mulilo Airport, was constructed in 1965 at a cost of 65 million Rand, an astronomical amount at that time when 2 Rand roughly equalled 1 Pound sterling. A police station was erected in 1961.
Katima Mulilo became a segregated town in 1965 when the erection of the Nghweeze township began. The South African administration was unhappy with the Mafulo informal settlement where members of the
