Many immigrants earn money from selling goods on the street
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South Africa will no longer require Mozambicans to seek visas for short stays, President Thabo Mbeki has said.
The current system was "embarrassing" and imposed "intolerable hardship" on those who cross the border to go shopping, he said.
Mozambicans and Zimbabweans account for many of the millions of illegal workers in South Africa - but the rules for seeking work permits will not change.
Several Mozambicans have been eaten by lions trying to enter South Africa.
The Kruger game park lies on the border between the two countries.
'No free-for-all'
The influx of African migrants since the end of apartheid has led to a rise in xenophobia, with some black South Africans fearing that the newcomers are taking their jobs.
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I used to compare going to South Africa to going to heaven. It's not easy to go to heaven
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There are some 80,000 Mozambicans legally working in South Africa - especially in mines.
The BBC's Jose Tembe in the Mozambique capital, Maputo, says the announcement has been widely welcomed there.
Until now, Mozambicans have had to pay a visa fee of $50 in hard currency and there have been long queues at the border posts.
"In reality this was to impose an intolerable hardship on the Mozambicans because lots of them shop in South Africa for a loaf of bread, soap, and cooking oil," Mr Mbeki said.
"I used to compare going to South Africa to going to heaven. It's not easy to go to heaven - you need to be a saint, you need to be pure," one Mozambican told the BBC.
"South Africa wants the same thing."
The visa waiver agreement is to be signed on Friday in the South African capital, Pretoria, during a visit by new Mozambican President Armando Guebuza.
Home Affairs Minister Nosiviwe Mapisa-Nqakula said that a similar deal was being considered with Zimbabwe but denied it would lead to a "free-for-all", reports the Business day newspaper.
South Africa frequently deports trainloads of illegal immigrants to Zimbabwe.
Last December, the trains were halted because Ms Mapisa-Nqakula said the migrants were using them as a way of getting free trips home for Christmas.