Reforms initiated by the government in the public transport sector have failed to get rid of illegal gangs and cartels.
Mooted last year, the thrust of the initiative was a requirement that all public transport operators either form Saccos or limited liability companies for better management.
The government also stopped licencing new 14-seater matatus from January. Licensing of individual operators was also barred.
The extortionist groups have crafted a way to defeat this initiative by rushing to register Saccos and making genuine matatu owners join in as members.
The Transport Licencing Board estimates that 30 per cent of the newly registered Saccos are owned by illegal groups which have operated in the sector for many years.
They came in to cash in on desperate matatu owners; some of whom had been turned away from established groups.
Some established Saccos either rejected potential members or asked for exorbitant registration fees, pushing operators into the hands of illegal gangs as the deadline for registration loomed.
A study released last week on the impact of the new integrated National Transport Policy on the 14-seater matatus confirmed this. The study was conducted by the Co-operative College of Kenya.
"With the advent of new transport policy, gangs commonly referred to as cartels rushed and registered Saccos especially in Nairobi.
The irony of it is that some members of the cartel do not own even a single vehicle," the report says.
The report adds that while joining Saccos is voluntary, matatu owners were coerced to do so, hence a great threat to their survival.
Genuine matatu owners were paying between Sh30,000 and Sh100,000, with the amounts treated as "off-balance sheet transaction" since they were meant to go directly into the pockets of gang members.
While established Saccos are the anchor of business growth in Kenya, most of the new groups are "briefcase" firms and do not even have offices, records or a common bond between members.
The report says that with the phasing out of the 14-seater matatus, existing Saccos are under threat of disintegration as pulling together resources to buy bigger capacity vehicles will be a tall order, unless some interventions are undertaken.
Of those interviewed, 80 per cent said the new transport policy spells death on Saccos.
Co-operative Development and Marketing minister Joseph Nyagah said matatu operators will have to change the way they conduct business to fit into the new system.
Interestingly, 60 per cent of the board members of registered Saccos are not aware of the new transport policy, according to the study.
For example, Mr Nyagah said, Saccos should merge into stronger and more viable units and amalgamate their welfare accounts to create a "bigger book" that could attract banks and other donors.
"The 14-seater matatu will continue to play a role in this country, but mostly in the rural areas. We will, however, have to look for ways of phasing them out in towns without hurting operators," the minister said.
He said it will require Sh50 billion to progressively phase out the smaller capacity vehicles.
There are about 60,000 matatus in Kenya, 14,000 of which are in Nairobi.
They constitute 80 per cent of the public transport system in the country and are estimated to have an annual turnover of Sh73 billion.
The sector contributes Sh4 billion to insurance companies and Sh1 billion in taxes.
The Economic Survey 2011 shows that the number of registered 14-seater matatus declined by 19 per cent over the year in response to the change of policy.
According to the national integrated transport system -- that includes highways, railways and airports -- matatus are expected to act as feeders, as they will be barred from operating on major highways to reduce traffic snarl-ups.