"She is not ready. She is not ready to battle this person," said the songstress speaking to The Truth Media.
The controversial singer noted that while Diana has done well for herself in the music industry, Karungi is still ahead musically.
"Spice is good... I respect her hustle. I respect the journey. I even admire where she is right now because I'm not yet there. She has a lot that I don't have, but Sheebah would beat her in a music showdown," she said.
Asked if she was siding with Karungi because of the new collab, Kapa Cat noted that the new duet has nothing to do with Diana and she can never be hired to participate in musician showbiz wars.
Cat and the Sipimika hitmaker have a new song titled Busy Nyo, which was produced by Kaysam and released four days ago.
Upon its release, the jam, which now has 76k views on YouTube, was thought by some to be a diss song aimed at Spice Diana, who had also just dropped Twookya, a response to Sheebah's Sipimika.
Twookya, which was released two days before Busy Nyo, was written by Anko Ronnie, produced by Bass Boi, and its video was made by Jahlive.
Kapa Cat said the release was coincidental because they had done the song earlier and planned the release dates way back.
In an interview, when she was asked if Twookya was a response to Sipimika, Diana said: "Let her enjoy it if she's the one you think it's targeting."
She said the song is about "fake feminists" and anyone living a "fake" life.
"We deal with a lot of fake people," she said, adding that such people should be confronted.
Meanwhile, Spice Diana has declined a music battle with Sheebah Karungi multiple times.