The CS noted that the private vehicles operate without valid licences and evade inspection, alongside engaging in offences such as transporting prohibited drugs.
He warned police officers and NTSA officials against colluding with the matatu owners to bend the law in their favour.
"We are being told the vehicles belong to bigwigs in the police service or NTSA officials. At this juncture, let them decide whether to remain in the private service or in the matatu industry," he said.
Murkomen's order follows a request by MOA officials who complained of unfair competition.
"They are messing up our business, they are eating into our revenue while they are not compliant," said MOA chairperson Albert Karakacha, noting that the unlicensed operators evade taxes.
"We are not going to entertain corruption as an industry. We believe we can manage our business within our Saccos," he added.
Murkomen reiterated government's plan to install security cameras on all major roads across the country to monitor traffic officers engaging in graft.
"We will have a command centre where the traffic police officer, instead of being on the streets, he or she is somewhere in a command centre," he said.
He said the government will leverage on technology to deliver its vision, to reduce road accidents.
Murkomen noted that matatu drivers have significantly improved on road safety compliance recording less accidents as compared to those caused by private motorists.
Latest report by NTSA revealed that 330 deaths occurred in October alone, with most fatalities recorded on Friday, Saturday and Sunday.
Murkomen revealed government's plan to establish an insurance court that will preside over insurance issues of the industry.
At the same time, the CS promised to form a taskforce to work on Smart Transport even as he urged NTSA to explore Telematics that is yet to be rolled out to improve the sector that is vital to the country's economy.
"More than just speed governor, it also gives us information to monitor what is happening in the vehicle and the behaviour of the driver," he said.
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Karakacha called on the matatu operators to be vigilant on the road to avert accidents during this festive season.
"We are telling our drivers to observe the rules on the roads; make sure that they carry the allowed capacity and celebrate without having challenges on our roads," he said.