Summary Introduction Functional iron deficiency ( FID ) is characterized by adequate body iron stores with an inadequate rate of iron delivery for erythropoiesis. In chronic kidney failure ( CKD ), iron availability is best assessed using the percentage of hypochromic red cells (%Hypo). The aim of our study was to determine the FID status of haemodialysis patients in central South Africa, using the %Hypo analyte and to evaluate the ability of the currently used biochemical tests, transferrin saturation ( TS at) and serum ferritin to diagnose FID . Methods For this study , 49 patients on haemodialysis were recruited. Haemoglobin (Hb), mean cell volume ( MCV ) and %Hypo were measured on the Advia 2120i. Biochemical analytes (serum ferritin, TS at) and C‐reactive protein ( CRP ) levels were also recorded. Results Of the 49 participants, 21 (42.9%) were diagnosed with FID (%Hypo >6%). A large number of patients (91.8%) were anaemic. The TS at demonstrated poor sensitivity and specificity for diagnosing FID compared with %Hypo. The use of %Hypo (rather than TS at) to guide intravenous iron use spared 16 patients the potential harmful effects thereof. Conclusion Using %Hypo as a single analyte to diagnose FID will lead to more appropriate use of limited resources and a reduction in treatment‐related complications.