Jacob Zuma, the president of South Africa, is facing an official investigation and public outcry over plans to upgrade his private residence and build a nearby town, dubbed "Zumaville", at a cost of millions to taxpayers.

Anger was surging on Monday over the 238m rand (£16.62m) renovations of Zuma's rural home in Nkandla, KwaZulu-Natal province, after it was revealed that Nelson Mandela and other former presidents' homes had received substantially less from the state. This followed controversy over proposals for a 2bn rand town, the first to be built since the end of apartheid, two miles (3.2km) from the Zuma homestead.

"Nkandlagate" could not come at a worse time with violent strikes threatening to spread from mining to other industries and focusing attention on the gap between haves and have-nots. Zuma, 70, faces a tense re-election battle within the governing African National Congress in December.

Earlier this year, Zuma said: "I have paid visits to a number of areas where you can't believe that you are in South Africa. Why should I see that, as the president of the country, not even of the ANC, and think that I could sleep peacefully when I know there are people who live in things you can't even describe as a house?"

Those words are being thrown back at him, with some observers comparing his hometown patronage to some of Africa's least democratic leaders. "He's behaving like a monarch rather than the president of the republic," said Aubrey Matshiqi, a research fellow at the Helen Suzman Foundation. "It makes me think of the king of Swaziland or Jean-Bédel Bokassa [self-crowned emperor of the Central African Republic]."

Upgrades to Zuma's private residence, which have soared to 238m rand from an estimate of 6.4m (£447,821) two years ago, include a helipad, underground living quarters with about 10 air-conditioned rooms, a medical clinic for the president and his family, houses for security staff, air force and police units, underground parking, playgrounds and a visitors' centre.

Zuma – who shares the property with his four current wives and their children – previously said he would meet most of the bill, but government documents revealed he will pay 5%. Taxpayers already maintain two state residences in Pretoria and Cape Town.

Newspaper reports in South Africa said public spending on Zuma's residence dwarfed that for the past presidents FW De Klerk, Nelson Mandela and Thabo Mbeki. Zuma came in for more criticism when his residence was declared a "national key point", meaning details are secret under an apartheid-era law.

Thuli Madonsela, the public protector, has received several complaints about irregular expenditure on the residence and has begun gathering information which could lead to a full investigation.

The civil society group Corruption Watch has also filed questions to the government.

The president is already pressure after it emerged in August that ground had been broken for the construction of a new town in the area. Initial estimates show the government will invest more than 1bn rand (£70m) of taxpayers' money, South Africa's Mail & Guardian reported, with a further 1bn rand required from the private sector.

The development project, known as the Umlalazi-Nkandla Smart Growth Centre, will reportedly span 200 hectares, enough space for 10,000 middle-class homes. It will include government offices, a library, theatre, a school with boarding facilities, a community safety centre, a recreation centre with a swimming pool and tennis courts and light industrial units including an agricultural market.

Residents of Nkandla – a rural backwater which has an unemployment rate of 47.4% – have already seen some tangible benefits from having the number one citizen in their midst. Julius Malema, the expelled ANC youth league president and Zuma's arch political enemy, has accused himZuma of building a "New York City of KwaZulu-Natal".

The president has hit back at the criticism, arguing that people should not be penalised for happening to live near him. "Why should people at Nkandla, 3km from where Zuma stays, starve?" he asked parliament last month. "Why must they be isolated? Why should others who are in other areas be more important than those? Should they be punished because they are neighbours of Zuma? I don't think so."

The president insisted that he did not personally intervene on behalf of his hometown. "The president has not instructed ministers to provide funding and a budget for the Nkandla-Mlalazi Smart Growth Centre. It is important to emphasise that even at a national level, Nkandla is not the only district that is receiving attention for rural development."

But opposition politicians have seized their chance to hammer Zuma's credibility as a former Zulu herd boy still in touch with ordinary people. Lindiwe Mazibuko, parliamentary leader of the Democratic Alliance (DA), said: "The DA has learnt that thousands of people living on the outskirts of Nkandla, in villages like Babanango, Kataza and Ebizimali, are still without the most basic services. Yet 2bn rand will be spent on a multi-purpose centre a few kilometres away from President Zuma's homestead."

She added: "How can a leader ask the country to make sacrifices, and tighten belts in hard times, when he leads such publicly-funded extravagance? This impoverished region of the country needs clinics, hospitals and decent classrooms. He has decided to build them literally in his own backyard. President Zuma's behaviour upends the very concept of social justice which is written into our constitution."

Political commentators have also excoriated the president. Justice Malala wrote in the Times of South Africa: "On Friday we had the incredible spectacle of the minister of public works, the until-then-relatively-credible former trade union leader Thulas Nxesi, making a complete ass of himself as he tried to defend the fact that taxpayers' money is being used to build the president a 238m rand palace in his home village, Nkandla.

"When journalists cornered Nxesi he then revealed that, actually, we are judging the president from a middle-class viewpoint. I think the country is going to the dogs when we start saying that looting the state is part of African culture, which is basically what Nxesi was saying."