This study reports on the prevalence and demographic correlates of substance use among individuals with mental illness in the Eastern Cape, South Africa. This cross-sectional study was conducted in the Outpatient Clinic of a large hospital in the Eastern Cape, South Africa. A pre-validated tool on alcohol and psychoactive drug use was administered to 390 individuals with mental illness. Multivariable logistic regression models were fitted to explore the demographic correlates of alcohol and psychoactive drug use. Of the total participants (N = 390), 64.4% and 33.3% reported lifetime (ever used) and past-year use of alcohol, respectively, but the prevalence of risky alcohol use was 18.5%. After adjusting for relevant covariates, only male sex, younger age, and rural residence remained significantly associated with risky alcohol use. The prevalence of ever-use and past-year use of psychoactive substances was 39.7% and 17.4%, respectively. The most common substance ever used was cannabis (37.4%). Male sex, younger age, owning a business, and being unemployed were significantly associated with higher odds of lifetime and past-year use of psychoactive substances. Findings highlight the need for dedicated infrastructure and staff training in the management of these dual diagnoses in the region.