An explosion today destroyed the home of merchant Dan Watson, a rugby-playing white liberal whose defiance of South Africa's sports segregation resulted in blacks exempting him from a crippling boycott of white-owned shops in the troubled Eastern Cape city of Port Elizabeth.

Two black employes who were in the house at the time of the blast were badly burned.

In other violence Sunday, a white motorist in Cape Province fired into a crowd of blacks stoning his vehicle, killing one man, United Press International reported. Violence also flared overnight, police said, after a funeral for three youths killed by police during riots last week. Two blacks died, at least seven were wounded and nine were arrested.

Meanwhile, underscoring a toughened attitude on the part of the government in the face of the country's deepening racial crisis, President Pieter W. Botha has taken steps to censure the president of a major university of which Botha is honorary head.

Watson's home was demolished by a powerful blast thought to have been caused by a limpet mine. He and his family were not in the house at the time.

Watson refused to speculate tonight on who might have planted the explosive.

But members of his family, saying they had received a number of anonymous telephoned threats, said they thought it was related to resentment harbored by other white shopkeepers in Port Elizabeth because blacks have exempted Watson from the consumer boycott that is crippling many of them.

Watson, 30, made an impact on the local black community nine years ago when he abandoned his membership of a whites-only rugby club and a sure place on the national team to play for a black club in one of the segregated townships outside Port Elizabeth.

Watson and three older brothers who also joined black rugby clubs were shunned by white friends and expelled by the Eastern Province Rugby Union for the stand they took, but they were hailed as heroes by the township blacks.

Their reward came earlier this year when black leaders ordered the residents of the township to exempt four clothing stores owned by the Watson brothers in Port Elizabeth and nearby Uitenhage from the boycott, which they started to pressure the white community into campaigning to end apartheid.

In a recent interview, Watson said that business at the brothers' stores had more than doubled since the boycott began.

Botha has requested a special meeting of the council of Stellenbosch University to consider what he apparently considers insubordination by the university president, Mike de Vries, who issued a statement Friday mildly criticizing the government for seizing the passports of eight students to prevent them from attending a meeting in Zambia with members of the outlawed African National Congress.

Botha's angry reaction to the students' decision has the flavor of a domestic argument within the politically dominant white Afrikaner community, whose Afrikaans-language newspapers have prominently featured it during the past week and whose editorials, in an unprecedented wave of criticism, have assailed what they called a heavy-handed overreaction on the part of the president.

Botha had been critical of earlier visits to the ANC by some leading businessmen and the leader of the main opposition party in Parliament, Frederik van Zyl Slabbert.