Craig Lambinon, a spokesman for the National Sea Rescue Institute, said a rescue operation was ongoing off the coastal town of Kommetjie, on the Cape peninsula south of the port city.

"Seven divers were rescued from the water, sadly two are deceased," Lambinon said.

"One has been transported to hospital in a serious condition and it appears at this stage that four are safe with minimal injuries."

The circumstances of the incident, which happened in the afternoon, were not immediately clear.

Rescuers were trying to recover another diver, Lambinon added.

The Cape Peninsula is home to South Africa's largest naval base, Simon's Town.

The South African navy is to hold a series of parades and military exercises in Cape Town from Saturday to Monday, with the public invited to board ships and a submarine.