Two men appeared before the Kabokweni Magistrate's Court on Wednesday on charges of defrauding the taxi recapitalisation project, Mpumalanga police said.
Captain Leonard Hlathi said taxi owner Oupa Tila Gama and his driver Lawrence Sithole would appear before the court again on December 8.
The men, both aged 47, were granted bail.
The two were arrested on Tuesday after police spotted a taxi, that was supposed to have been scrapped under the taxi recapitalisation project, operating near Nelspruit.
The "taxi" in question was actually a Stallion bakkie with a rear canopy and seats inside.
The "taxi" had worked the Edwaleni to Kabokweni route before the taxi recapitalisation project started.
The taxi owner went to have the vehicle de-registered and scrapped on July 17 of this year. It was duly de-registered on July 18 and he received R50 000 as part of the project four days later.
He then used the R50 000 to finance a new Toyota Quantum Kombi.
Though the Stallion "taxi" was supposed to have been scrapped, it was spotted with its same number plates on the same road between Edwaleni and Kabokweni near Nelspruit, Hlathi said.
It is, but it's not
Police received information from the public about the taxi and went to the owner's house on Tuesday.
The owner told police that the Stallion "taxi" was in fact a different vehicle to the previous Stallion "taxi" and one of his drivers had put the old plates onto the new vehicle.
Police did not believe the man, Hlathi said.
Upon further investigation the engine and chassis numbers were found to differ from those the Traffic Inspectorate had on its records.
The vehicle's licence discs were found to be poor fakes and had been photocopied.
The taxi owner was arrested and would appear before the Kabokweni Magistrate's Court on Wednesday.
Police suspected that this was not an isolated incident and that more such incidents might come to the fore.
Police warned that they would arrest those found defrauding the project which had been designed to improve the taxi industry in South Africa, Hlathi said.