UPDATE 1-South Africa's rand hits 7-week low on ANC policy plans

(Updates prices)

JOHANNESBURG, July 5 - South Africa's rand hit a seven-week low against the dollar on Wednesday after the ruling party proposed at a policy conference to nationalise the central bank and expropriate land without compensation.

The rand traded at 13.4200 per dollar, 1.6 percent weaker on the day and at the weakest since May 18, according to Thomson Reuters data.

But the weaker currency sparked demand for shares in South African companies that earn the bulk of the profit overseas, pushing the benchmark index nearly 1 percent higher.

TreasuryOne currency dealer Andre Botha said the rand had been pressured by a stronger dollar earlier in the session and extended losses after reports that the African National Congress (ANC) had agreed that the central bank should be state-owned.

The ANC also proposed that land expropriation without compensation should be allowed where it is "necessary and unavoidable".

"All these radical transformation policies there has been rumblings on them for a while now. The fact that they are thinking about it is worrisome and that's why the rand has tanked," Botha said.

The party's proposal on the central bank is likely to raise concerns about the independence of the Reserve Bank after an anti-graft watchdog recommended its mandate be changed to place more focus on growth and not just inflation and the rand currency.

On the bourse, the blue-chip JSE Top-40 index added 0.9 percent at 42,241 and the broader All-share index was up 0.8 percent at 52,483.

Companies such British American Tobacco, (BAT) drugmaker Aspen Pharmancare and foodservice firm Bidcorp were in demand thanks to a weaker rand.

BAT was up 2.9 percent, Aspen climbed 2.5 percent and Bidcorp picked up 4.5 percent. These companies earn the bulk of the profits offshore and are considered safe bets when the rand weakens.

In fixed income, the yield for the benchmark government bond duein 2026 jumped 9 basis points to 8.86 percent.

(Reporting by Tiisetso Motsoeneng and Olivia Kumw enda-Mtambo Editing by Jeremy Gaunt)