* Storm knocked out power lines to hydroelectric dam in May
* Small businesses, mainstay of employment, suffering
* Economy grew 11 pct last year after good harvest, oil
By Abdoulaye Massalatchi
NIAMEY, June 19 Niger's worst power cuts in years have crippled businesses and government offices in the capital Niamey for more than three weeks, raising fears they could harm the fragile economy of one of the world's poorest nations.
Niamey and Niger's southwestern provinces of Dosso and Tillaberi have been largely without electricity since May 25 when a storm knocked out power lines to the Kainji hydroelectric dam in western Nigeria.
The three regions are home to more than a third of Niger's 17 million inhabitants, and the bulk of the output from the landlocked country's $11 billion economy, which grew 11 percent last year thanks to good harvests and the start of oil output.
Small businesses, which employ most of the population, have been the hardest hit as they can seldom afford generators. Most of the population in Niger, which ranked bottom of the U.N. human development index, survives on around 1 dollar a day.
With summer temperatures soaring, water has been cut off in parts of the capital and surrounding towns. Niger's state radio has transmitted only intermittently in recent days after its standby generator burnt out.
"Our production capacity is one third our needs so blackouts are inevitable," Foreign Minister Mohamed Bazoum said.
The connection with Nigeria provided half the 103 megawatt needs of Niamey and Tillaberi, and all of Dosso's.
Two power turbines supplying Niamey and Tillaberi have since burnt out under the strain of round the clock production, further cutting the region's generating capacity from 56 megawatts to 39.
Of the 39 megawatt of generation capacity still serving the capital, half is reserved for the armed forces, the SEEE water company and hospitals, leaving the private sector and other government departments even more short of power.
Ousmane Souley, a tailor with five apprentices, said his company had ground to a halt as he received only half an hour of electricity a day to run his sewing machines.
"My family is only surviving thanks to my savings," he said.
Boubacar Mariama pointed to her empty freezer in despair, saying she could no longer sell cold sodas and milk products, normally a profitable business in Niamey's scorching 40 degree Celsius (104 Fahrenheit) heat.
"No one wants to risk getting poisoned," she said.
The power outages add to Niger's economic challenges after a suicide attack in May halted production at Areva's Somair mine in Arlit - the country's largest uranium mine.
Uranium accounts for 61 percent of Niger's exports, and Somair made up two-third of the 4,500 tonnes produced last year.
"This energy crisis is going to have an impact on economic growth," said Cherif Chako, an economist at Niamey university. "All sectors are affected: production, trade and consumption."
Nigelec director general Halid Alhassane said hopes of restoring electricity using a temporary connection to Nigeria fell apart last weekend when an electricity pylon collapsed. He declined to set a new date for restoring power.
Niger's state fuel company Sonidep agreed to supply Nigelec with 400 million CFA francs ($817,400) of diesel a day to keep its handful of diesel generators running. It is heavy blow to Niger, which is struggling to pay public sector salaries.
Like many civil servants in Niamey, Mahamadou Sidikou only goes to the office to check in before heading to the park.
"The office is like an oven as there is no air conditioning," he said with a shrug. "He cannot help any clients anyway, as we need to look up their files on the computer." ($1 = 489.3740 CFA francs) (Writing by Daniel Flynn; Editing by Alison Williams)