The official reports are in, and with NZ Inc optimistic the Government will make a bold decision to end the state-owned Cook Strait ferry service debacle, one sector wit is picking we could get our new ships and save enough to buy the Prime Minister a new plane.
All eyes on Govt to end the state-run Cook Strait ferry service fiasco with a speedy decision
KiwiRail's Cook Strait ferries are aged and breaking down, causing safety fears, disruption and service delays. Photo / Mark Mitchell
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Sector observers say if new ferries - probably two - are recommended, they won’t be rail-enabled. They say ships to take rail wagons are not being built or used much globally these days, and that KiwiRail’s proposal for a rail ship added hugely to the infrastructure cost of the now abandoned project. They say KiwiRail already has the equipment for loading and unloading containers and freight on ferries without rail wagon capacity.
When the travelling public and commercial freight operators will see either official report is unknown.
And while Finance and KiwiRail shareholding minister Nicola Willis has been publicly critical of KiwiRail, particularly its spending largesse on consultancy McKinsey - she said the SOE had spent an “excessive and not justifiable” amount with the firm - her office is not as candid about the Government’s options.
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Word in the transport sector is that KiwiRail paid McKinsey around $8 million recently for a strategic review to lift performance across its rail freight and ferry business.
The Herald asked KiwiRail and Willis’ office if this figure was correct.
KiwiRail responded that the cost of consultants was commercially sensitive. It had nothing to add to a previous statement to the Herald on the matter.
A spokesperson for Willis’ office said the Minister had raised “deep concern” with the amount of money being spent by KiwiRail for McKinsey’s advice “and she asked why the management team couldn’t do the work itself”.
“The Minister sought to reveal the sum and was advised by KiwiRail that revealing it would be in breach of their contractual arrangement with McKinsey.”
KiwiRail chairman David McLean resigned a week after Willis’ criticism.
The Herald also asked Willis’ office if the ministerial advisory committee had recommended KiwiRail relinquish the Cook Strait service in favour of a commercial operator or a new entity with some Crown oversight; when the committee’s report would be made public; whether she considered KiwiRail’s Cook Strait ferry service profitable; and whether the service was meeting its obligation under the SOE Act to be at least as profitable as a private operator doing the same job.
The response: “Ministers have been clear about their concerns in relation to the performance of KiwiRail, and our intentions to refresh its board. Ministers have received recommendations from the MAG (committee) and are reviewing them. Cabinet will consider the next steps in future and announcements will be made thereafter”.
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Meanwhile, commercial players in the Cook Strait freight business, valued at $15b-$20b a year, are weary of the uncertainty over the service and want to hear from the Government soon.
Don Braid, managing director of NZX-listed global logistics company Mainfreight, says the sector is “terribly frustrated” over the ferry breakdowns and delays and “we should not be hesitating too much in terms of settling on what the replacement looks like and getting on with it”.
“It’s not just the KiwiRail issues, it’s across a number of infrastructure assets. I think the Government will be best served to make some decisions, invest in that infrastructure and get on with it.”
Braid says Mainfreight, which posted global revenue in 2023 of $4.7b, is confident it can keep freight flowing across Cook Strait despite all the breakdowns and delays.
“It’s not an immediate issue, it’s more about the long-term certainty the country needs and the confidence it needs in infrastructure assets.”
On whether KiwiRail should exit Cook Strait, Braid says “it’s a topic of discussion, let’s see where that leads”.
“The thing we should remember is that it’s an extension of SH1 and the rail network. Therefore how does private business interlink into that infrastructure?
“I think that’s a question that needs to be understood and then answered.”
Road freight member organisation Transporting NZ isn’t ready to say if KiwiRail should exit the service.
“At this point we are interested in seeing the outcome of the (MoT) assessment for the long-term requirements... that would really inform our position,” says Billy Clemens, policy and advocacy lead.
“I think as an industry group it is our general position that a commercial solution in the freight space is ultimately our preference. However, we do want to be pragmatic when it comes to keeping the freight task moving.”
The organisation’s interim chief executive Dom Kalasih says the freight industry is “pretty unflappable” and has learned to work its way around disruption.
“These maintenance issues and disruptions are sort of baked into the business. However, it is still unsettling at another level.
“A lot of our members are small operators and family businesses. I’m really keen to stress that at the end of the day, we are a service provider.
“We’re in the middle of the supply chain and sometimes we’re in the gun. But the people that are most affected by all this are the end users (consumers).”
Transporting NZ supported the axing of the big KiwiRail project.
“In broad terms, we are still supportive of the Government’s response. But the message is, please continue at pace. Keep the industry notified and advised. And meantime, any reassurance the Government and KiwiRail can give around maintenance processes is really important.”
Andrea Fox joined the Herald as a senior business journalist in 2018 and specialises in writing about the $26 billion dairy industry, agribusiness, exporting and the logistics sector and supply chains.
