JOHANNESBURG, May 28 (Reuters) - South Africa has decided to set up refugee camps for tens of thousands of African migrants who fled their homes during a wave of deadly xenophobic attacks, the BBC said on Wednesday.

President Thabo Mbeki's government is expected to announce the decision to establish seven camps throughout the country after a cabinet meeting on Wednesday, the broadcaster said in a report on its Web site.

At least 56 people died and up to 100,000 were displaced when mobs armed with clubs, knives and stones, rampaged through shantytowns in Johannesburg, Cape Town and other parts of the country earlier this month.

The violence has subsided but there is mounting criticism of the government's response to the crisis, which has tarnished the country's image internationally and raised investor concerns about political stability within its borders.

South Africa's Home Affairs Department denied that refugee camps would be established.

"We are not setting up refugee camps ... it is shelter for those who have been displaced," spokeswoman Siobhan McCarthy told the SAPA news agency. "Typically refugee centres are long term, we are really looking for a solution for the short-term."

Relief agencies and U.N. officials say they are shocked at conditions in makeshift shelters where thousands of Zimbabweans, Mozambicans and other migrants now live. Many are sleeping outside in temperatures that drop to near freezing at night.

The lion's share of blankets, tents, clothes and food distributed to the refugees have come from humanitarian and religious groups and individual citizens. There are few signs of significant aid from government.

Aid group Medecins Sans Frontieres (MSF, Doctors Without Borders) and the Red Cross have described the government's response as inadequate and say the situation is worsening in the shelters, posing health risks to the refugees and community at large.

Doctors and nurses report an array of respiratory infections, diarrhoea and other opportunistic diseases among the refugees. Many are traumatised emotionally and want to leave South Africa.

At least 50,000 Mozambicans and Zimbabweans have departed South Africa since the attacks began on May 11. Smaller numbers have gone back to Zambia and Malawi.

Zimbabweans are the largest immigrant group in South Africa, accounting for an estimated 60 percent of the 5 million migrants here. South Africa's population is about 50 million. (Reporting by Paul Simao; Editing by Jon Boyle)

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