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South African companies are undervalued by the stock market in London because foreign investors are concerned about the Black Economic Empowerment initiative, according to finance professionals.

A survey by id21 last year found that blacks are getting poorer in the new South Africa, while whites are getting richer. In 2002, two out of three black households in Cape Town townships did not have enough to eat, the development research body said.

Not to reform, said the South African High Commissioner in London, Dr Lindiwe Mabuza, would lead to people becoming "discontent, disillusioned and even cynical".

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