Waikouaiti was the first European settlement in southern New Zealand to be mainly based on farming and one of the first enduring European settlements in Otago. From 1837 there had been a whaling station confusingly also called "Waikouaiti" nearby on the south side of the estuary at what is now called "Karitane". Having already purchased large areas of land in the South Island (much of which was later declared to have been iinvalid) Johnny Jones sent settlers from Sydney, Australia in the "Magnet" to farm the district in 1840, eight years before the foundation of the Otago Association's settlement. This was the first farm in the Otago region.