The inclusion of mental health in the Sustainable Development Goals represents a global commitment to include mental health among the highest health and development priorities for investment. Low- and middle-income countries (LMICs), such as South Africa, contemplating mental health system scale-up embedded into wider universal health coverage-related health system transformations, require detailed and locally derived estimates on existing mental health system resources and constraints. The absence of these data has limited scale-up efforts to address the burden of mental disorders in most LMICs. We conducted a national survey to quantify public expenditure on mental health and evaluate the constraints of the South African mental health system. The study found that South Africa’s public mental health expenditure in the 2016/17 financial year was USD615.3 million, representing 5.0% of the total public health budget (provincial range: 2.1–7.7% of provincial health budgets) and USD13.3 per capita uninsured. Inpatient care represented 86% of mental healthcare expenditure, with nearly half of total mental health spending occurring at the psychiatric hospital-level. Almost one-quarter of mental health inpatients are readmitted to hospital within 3 months of a previous discharge, costing the public health system an estimated USD112 million. Crude estimates indicate that only 0.89% and 7.35% of the uninsured population requiring care received some form of public inpatient and outpatient mental healthcare, during the study period. Further, mental health human resource availability, infrastructure and medication supply are significant constraints to the realization of the country’s progressive mental health legislation. For the first time, this study offers a nationally representative reflection of the state of mental health spending and elucidates inefficiencies and constraints emanating from existing mental health investments in South Africa. With this information at hand, the government now has a baseline for which a rational process to planning for system reforms can be initiated.