South Africa is set for a steep decline in wine production in 2018 as the country grapples with a water crisis ravaging Cape Town and surrounding areas, a Paris-based global organisation said Tuesday.

Africa's top wine producer is set to produce 8.6 million hectolitres of wine this year, down 20.4 percent down from 2017, the International Organisation of Vine and Wine (OIV) said in a statement.

The Western Cape region has gone without significant rains for more than three years, forcing South Africa's second city to slash residential water consumption.

While cautiously welcoming the water shortage's impact on improved grape flavours, South African winemakers have been struggling with the drought, which has sown panic across the Cape Town area.

More broadly, overall production in the southern hemisphere is set to remain stable at around 52 million hl -- only a marginal change from last year.

Argentina, the world's sixth-biggest producer, will see its production rise 14.2 percent to 13.5 million hl.

In Chile, also a rising star in the world of wine, is set to see a 19 percent rise to 11.3 million hl.

Australia, the world's fifth producer, will however see its production dip 8.7 percent to 12.5 million hl.

The OIV meanwhile confirmed a historic drop in production triggered by unusually long winters in the world's top three winemakers -- Italy, France and Spain.

But in more positive news, in a sign that wine lovers may have finally put the global financial crisis behind them, global consumption stabilised in 2017 at 243 million hl.

"The downturn in the consumption of historic consumer countries -- France, Italy and Spain -- appears to have stabilised, while the consumption of the United States, China and Australia continued to increase," the OIV said in a statement.

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