Police conducted the raid on Wednesday after receiving information.
According to national police spokeswoman Aslenda Mate, the Libyans allegedly “falsely stated” on their visa applications that they were being trained as security guards.
AFP quoted a second police spokesman, Donald Mduli, as saying the camp was originally registered as a training ground for a private security company but its use appeared to have changed.
Mr Mdhluli said the security company owner, a South African national, was investigating whether police had permission to run the site as a military-style camp.
Mr Mdhluli said the Libyans were being accused of other “serious crimes” besides immigration violations, and that there had been several complaints of rape in the community.
In a police statement, Police Commissioner Jeff Mkhwanazi was quoted as saying: “We take all threats to the security and stability of our province and country very seriously.”
But the same statement reassured the public that “there is no immediate threat to community safety.”
South Africa's high crime rate has led to a significant growth in the private security industry.
According to a report by the Private Security Industry Regulatory Authority (PSIRA), security companies have grown by more than 40% over the past decade.
It is common for foreigners to seek jobs in these companies.
Libya has suffered chronic instability since the ouster of dictator Muammar Gaddafi in 2011.
Analysts say Libyan internal forces have in the past recruited from sub-Saharan Africa, and Friday's developments raise serious questions about South Africa's border security.
95 Libyan nationals are being detained and interrogated by the relevant authorities.
Police did not disclose from whom the detainees received military training.
