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The shift in emphasis to universal primary health care in post-apartheid South Africa has been accompanied by a process of decentralization of mental health services to district level, as set out in the new Mental Health Care Act, no. 17, of 2002 and the 1997 White Paper on the Transformation of the Health System. This study sought to assess progress in South Africa with respect to deinstitutionalization and the integration of mental health into primary health care, with a view to understanding the resource implications of these processes at district level. A situational analysis in one district site, typical of rural areas in South Africa, was conducted, based on qualitative interviews with key stakeholders and the World Health Organizations Assessment Instrument for Mental Health Systems (WHO-AIMS). The findings suggest that the decentralization process remains largely limited to emergency management of psychiatric patients and ongoing psychopharmacological care of patients with stabilized chronic conditions. We suggest that, in a similar vein to other low- to middle-income countries, deinstitutionalization and comprehensive integrated mental health care in South Africa is hampered by a lack of resources for mental health care within the primary health care resource package, as well as the inefficient use of existing mental health resources. [ABSTRACT FROM AUTHOR]