The Wanganui District Council said the mess was not wastewater, as that was screened.
The Eides $40,000 Fishing Contest is due to take place along the beach on February 23, with a taster the day before.
Organiser Grant Clark is fervently hoping the problem will be dealt with by then.
"We can't cancel the contest now. We've got 800 entries, 65 per cent of them from out of town."
He knew semi-treated wastewater had been diverted out to sea, but had been told it would not be contaminated, so hadn't worried about it.
The Wanganui District Council has been pumping the city's screened wastewater out to sea through an outfall 1.7km offshore since the final days of January.
The wastewater is bypassing most treatment. The council has to divert it while sludge is removed from a pond at its troublesome wastewater treatment plant, in a first stage to setting up a better system.
Mayor Annette Main said the substance was not connected with bypassing wastewater to the sea.
"It appears to be mostly wool and if it had gone through the Beach Rd pump station and then the ocean outfall it would have blocked up the screening process."
There was no evidence of the substance at Beach Rd, and the Horizons Regional Council was investigating where it came from. Samples had been sent for analysis.
Mr Clark said council chief executive Kevin Ross has been sympathetic to his contest dilemma, and the council was "going to get rid of it for us". South Beach surfer Lee Morgan says he's seen the same gunk four or five times this summer, but this is the worst. It makes his skin itchy, and he doesn't like the taste of it in the water.
"I wish they had (got rid of it) all the other times that I saw it."
He said the sea current had been flowing north lately and would push wastewater toward South Beach.
A fisherman who went to South Beach on Monday night was angered by what he found and sent the Chronicle photographs. He thought it was to do with the wastewater diversion, said the sea was extremely dirty and he could definitely see toilet paper.
Ms Main said the substance was spread between Kaitoke Stream and the South Mole. It had come in on two high tides, and the beach would be closed until further notice.
Trucks are due there today to remove the substance. The cost of the clean-up is not known.
The council is waiting to see if more washes up on the next high tide.
Coastal scientist Dr Roger Shand said material from the ocean outfall only fetched up on South Beach after several days of light, onshore winds, which did not happen often.
