(Recasts with government offers shelter, adds union statement)

By Emelia Sithole-Matarise

PRETORIA, May 28 (Reuters) - South Africa's government said on Wednesday it was offering shelter to tens of thousands of African migrants who fled their homes during a wave of xenophobic attacks but denied it was setting up camps.

The BBC reported on its website that President Thabo Mbeki's government was expected to announce the decision to establish seven camps after a cabinet meeting on Wednesday.

"Government has noted with concern media reports that cabinet has taken a decision to establish refugee camps. Government wish to put it on the record that cabinet has not taken such a decision and that the reports are baseless and therefore not true," it said in a statement.

The Home Affairs Department also denied 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."

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 South Africa 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.

LABOUR SLAMS GOVERNMENT

South Africa's main labour federation, COSATU, said the government must shoulder part of the blame because its failure to help resolve the economic and political crisis in neighbouring Zimbabwe led to millions of that country's citizens fleeing across the border.

"COSATU and many others warned long ago that the political and the economic melt-down in Zimbabwe, due to the mismanagement of the Robert Mugabe regime, would eventually force people to leave the country and become economic refugees, including in South Africa," COSATU said in a statement.

"Our government did the usual denialism and refused to act."

Some 800 mostly Somali and Ethiopian refugees at a makeshift camp in Pretoria dumped food provided by the government and rejected efforts to move them into temporary shelter in protest at what some said was the state's slow reaction to the attacks.

"People were killed here and they were looking. We don't want any help from the government. We don't trust them any more ... We want the U.N. to help us," said 20-year-old Ahmed Adam Abdi.

Some refugees said they were on a hunger strike to press demands for U.N. intervention to repatriate them or help them secure refuge in other countries.

"In my country we are killing each other with guns. Here they burn you alive. This is pure hatred. It's better to be shot than to be burnt alive," said Elmy Warsm, a 55-year-old Somali refugee who said she had lost everything she had built up over a decade of living in South Africa.

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.

Aid group Medecins Sans Frontieres 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. (Additional reporting by Marius Bosch, Phakamisa Ndzamela and Paul Simao; Editing by Robert Woodward)

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