When KiwiRail was first formed in 2008 there was much excitement at what was to come. With some 40 million tonnes of New Zealand's annual 300 million tonne freight task being suited to rail, there was an opportunity with government investment to more than double the pre-existing 18 million tonnes being carried on rail at the time.
Fast forward 17 years to 2025 and KiwiRail is carrying less than ever at around 15 million tonnes per year. Yards around the country are filled with hundreds of surplus wagons and as reported extensively in South African media on November 2nd 2025, KiwiRail have decided to sell off a quarter of their locomotive and rolling stock fleet to a company in South Africa who will lease them to private operators as part of South Africa's ambitious plan to increase rail freight volumes from 160 million tonnes per year to 250 million tonnes.
The difference between New Zealand and South Africa's approach to rail freight is stark. New Zealand is going full steam backwards whilst South Africa powers forward. South Africa has a specified goal of 250 million tonnes, up from 160 million tonnes. KiwiRail has no stated goal, and never has.
Politicians have poured billions into network upgrades but have never required the company to grow volumes in return. And so they haven't. Down from 18 million tonnes in 2008 to just 15 million tonnes in 2025.
In New Zealand we maintain an inefficient state owned monopoly and protect it from competition. In South Africa the network has been opened up to competition and multiple new companies have lined up to operate trains competing with the state operator.
It's ironic that KiwiRail is doing more to grow rail freight volumes in South Africa than it is at home.
The New Zealand public have been told that the rationale for investing in KiwiRail is to achieve mode shift from road to rail, delivering environmental, economic and social benefits. Since KiwiRail is carrying less, not more, after 17 years of intense investment to the tune of some $10 billion, we can conclude that the benefits have not eventuated and the rationale for investing in KiwiRail has failed.
At the heart of this failure is the lack of competition on the New Zealand railway network. KiwiRail has a very specific business plan that targets only a small number of large customers. They are primarily a logistics partner for the ports working with New Zealand's biggest exporters, with a small domestic freight component between Auckland and Christchurch.
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| Two former KiwiRail locomotives now in service in Namibia. KiwiRail have already sold more than a dozen of their serviceable locomotives to African operators and are set to sell another 46 locomotives in 2026 and likely more thereafter, prioritizing growth in Africa at the expense of growth in New Zealand |
KiwiRail has divested itself of all other customers over the past 17 years, usually by way of increasing their contract rates by as much as 300%, ensuring the customer leaves and switches to road transport.
KiwiRail's chosen niche market is essentially fully captured. There is little to no scope for increasing their customer base. Essentially KiwiRail's freight volumes will only go up or down according to the fortunes of their existing customers. This is why we see negative growth in KiwiRail.
If New Zealand is to grow rail freight volumes then it requires a competitive and innovative rail industry in which other players can add their own business strategies to the bigger picture. With some 25 million tonnes of rail-suited freight on offer there is plenty of opportunity for growth, especially with smaller customers who may only fill one or two wagons at a time, which KiwiRail has priced off the market but where other operators will price competitively.
Whilst KiwiRail may only offer a rate competitive with trucking if the customer loads 30 wagons, another operator may be willing to price competitively with trucking for a single wagon load, but aim to have 30 customers. Same end result, but with many more currently unrealized customers coming onboard under the latter scenario. There is also a multitude of legacy issues with KiwiRail that add to the inefficiency of the company that other players won't have.
One of the major impediments to new companies starting rail operations is the establishment costs. However, with KiwiRail currently presiding over some 60 soon-to-be-surplus locomotives and at least 920 surplus wagons (likely more), now is the opportune time for the government to make the same bold decision the South African government has made, and make the following changes:
- Open up the New Zealand rail network to competition, setting a goal of eventually increasing freight volumes on rail from 15 million tonnes to 40 million tonnes, bringing in private capital in addition to any remaining government investment.
- Transfer ownership of KiwiRail's 60 surplus locomotives and 920 surplus wagons to the New Zealand Railways Corporation (NZRC), who currently manage KiwiRail's land requirements.
- Allow NZRC to lease locomotives and rolling stock to new entrants who wish to establish operations on the New Zealand rail network.
Australia went through a similar process in the late 1990s, and that resulted in a more than doubling of interstate rail freight volumes. The UK and parts of Europe had similar results, with the UK alone experiencing 66% growth after private operators were allowed to do business.
South Africa's plans are very ambitious, but there's no shortage of new companies coming on stream, with at least seven buying up locomotives and rolling stock from wherever they can get them, ready to commence operations.