Canaf Investments : Management Discussion & Analysis

For the nine months ended July 31, 2022

Management Discussion & Analysis

(Expressed in U.S. dollars)

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CANAF INVESTMENTS INC.

Management Discussion and Analysis for the nine months ended July 31, 2022

Expressed in U.S Dollars

INTRODUCTION

Date Prepared: 26th September 2022

This Management Discussion and Analysis, ("MDA") covers the operations of Canaf Investments Inc. ("Canaf" or the "Corporation") for the nine months ended July 31, 2022 and should be read in conjunction with the unaudited consolidated Financial Statements for the nine months ended July 31, 2022 and related notes. The Financial Statements are presented in accordance with International Financial Reporting Standards ("IFRS"). Canaf's accounting policies are described in Note 2 of the unaudited Financial Statements for the six months ended July 31, 2022. The financial statements together with this MDA are intended to provide investors with a reasonable basis for assessing the financial performance of the Corporation.

All dollar amounts are expressed in US dollars, the functional currency of the Corporation, unless otherwise stated. The Corporation's listing on the TSX-V however, is quoted in Canadian Dollars. Additional information relating to the Corporation is available on SEDAR at www.sedar.com. or at Corporation's website at www.canafinvestments.com.

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CANAF INVESTMENTS INC.

Management Discussion and Analysis for the nine months ended July 31, 2022

Expressed in U.S Dollars

DESCRIPTION OF BUSINESS

Canaf is incorporated in the Province of Alberta with two wholly owned subsidiaries in South Africa, Quantum Screening and Crushing (Pty) Limited ("Quantum"), and Canaf Investments (Pty) Ltd, ("Canaf Ltd").

Quantum, through its 70% owned subsidiary, Southern Coal (Pty) Ltd. ("Southern Coal"), processes anthracite coal into de-volatised anthracite (calcined anthracite) for sale mostly to steel and ferromanganese manufacturers as a substitute product for coke.

Canaf Investments (Pty) Ltd, incorporated in 2019, acts as Canaf's South African holding company with the intention of creating a diverse Corporation focused on sustainable and long-term growth sectors within South Africa. Canaf Investments (Pty) Ltd owns 100% of Canaf Estate Holdings (Pty) Ltd., ("CEH"). Canaf Investments (Pty) Ltd. is also exploring new sectors to invest in within South Africa, whilst continuing to develop and expand CEH.

Southern Coal - Calcined Anthracite, South Africa

Southern Coal produces calcined anthracite, which is primarily sold as a substitute to coke in sintering processes, by feeding anthracite coal through its rotary kilns, at temperatures between 900 and 1100 degrees centigrade; the volatiles are driven off and the effective carbon content increased. Southern Coal supplies world leading steel and ferromanganese producers in South Africa from its operations near Newcastle, KwaZulu Natal.

Canaf Estate Holdings - Property Investments, South Africa

CEH is a property investment company focused on acquiring, redeveloping and renting properties primarily within the suburbs of the old Johannesburg CBD. CEH made its first property acquisition in August 2019, and now owns 3 properties, with a total value of approximately R4 million, expected to generate net pre-tax returns in excess of 15%.

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CANAF INVESTMENTS INC.

Management Discussion and Analysis for the nine months ended July 31, 2022

Expressed in U.S Dollars

OVERALL PERFORMANCE AND OUTLOOK

The quarter ending July 31, 2022 reflects a significant improvement in sales and net income, in comparison to the previous quarter, driven by an increased demand for Southern Coal's calcined anthracite, as well as an upwards sale price adjustment effected in July.

The quarter reflects a 51% rise in sales, compared to the previous quarter, taking the 9-monthyear-to-date revenues to US$11,309,650. In prior quarters Southern Coal was affected by rising input costs which reduced its gross margin, however sale price adjustments, effective 01 July 2022 have improved both margins and profit. For the nine months, the Corporation recorded a net income of US$668,316, only 18% behind the same 9- month period last year (2021: US$813,883). The Corporation expects to see Q4 deliver similar sales quantities as Q3, which will further improve net income and margins for the year.

The Corporation believes that the prospects for the anthracite beneficiation business in South Africa (Southern Coal) remains stable as it continues to explore new opportunities with alternative product lines. Since the period-end, Quantum has invested in new crushing equipment that it expects to commission in Q4 2022; this should allow Southern Coal to maintain its maximum sales capacity during the rainy season in KwaZulu- Natal (Oct-Mar).

During the quarter CEH agreed terms to purchase a fourth property which it expects to transfer during Q4 2022. This fourth property will bring the overall portfolio to a value of approximately R6.9million with a target yield of 15% per annum.

The board is confident that the Corporation continues to be in a very strong financial position, with no long- term debt, as it looks to invest in new opportunities both aligned to the existing calcining business, as well as in new sectors. The Corporation remains focused on long-term sustainable, and socially responsible growth, within South Africa.

As of July 31, 2022, shareholder equity stood at US$5.6m, or CAN$7.0m, which relates to a book value per share of CAN$0.147/share.

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CANAF INVESTMENTS INC.

Management Discussion and Analysis for the nine months ended July 31, 2022

Expressed in U.S Dollars

Selected Financial Information

Due to the Corporation being listed on the TSX-V and its share price being quoted in Canadian Dollars, the Corporation has converted some key financial information included in this report to Canadian Dollars. The following financial information is derived from the Corporation's unaudited financial statements for the nine months ended July 31, 2022, with a comparison in Canadian Dollars.

	9 Months Ended		9 Months Ended
		Jul 31		Jul 31
	2022	2021	2022	2021
	US$	US$	CAN$	CAN$
Conversion 1.00 US (av. 12 months)			1.254	1.258
Revenue from Sales	11,309,650	10,834,358	14,186,269	13,632,778
Cost of Sales	(10,156,854)	(9,486,399)	(12,740,259)	(11,936,653)
Gross Profit	1,152,796	1,347,959	1,446,010	1,696,125
Expenses	(439,356)	(375,060)	(551,107)	(471,935)
Interest Income	131,089	106,821	164,432	134,412
Other Income	67,068	32,267	84,127	40,601
Gain from Sale of Vehicle	4,519	0	5,668	0
Net Income for the year (before tax)	916,116	1,111,987	1,149,130	1,399,203
Income Tax Recovery (Expense)	(247,800)	(298,103)	(310,828)	(375,101)
Net Income for the year	668,316	813,883	838,302	1,024,102
Attributable to the Shareholders	513,976	646,812	644,706	813,878
Attributable to the Non-Controlling Interest	154,340	167,071	193,597	210,224
Adjusted EBITDA	792,848	1,091,190	994,509	1,373,035

Non- GAAP Performance Measures

The Corporation has included additional financial performance measures in this MD&A, such as adjusted EBITDA. The Corporation believes that, in addition to conventional measures prepared in accordance with IFRS, certain investors use this information to evaluate the Corporation's underlying performance of its core operations and its ability to generate cash flow. Accordingly, it is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.

*Reconciliation of Adjusted EBITDA and Profit
		9 Months Ended	9 Months Ended
		Jul 31		Jul 31
	2022	2021	2022	2021
	US$	US$	CAN$	CAN$
Conversion 1.00 US Dollar Rate			1.254	1.258
Net Income for the year	668,316	813,883	838,302	1,024,102
Interest Paid	0	0	0	0
Interest received	(131,089)	(106,821)	(164,432)	(134,412)
Foreign Exchange Gain/ (Losses)	7,821	(6,762)	9,810	(8,508)
Depreciation	0	92,786	0	116,752
Income Taxes	247,800	298,103	310,828	375,101
Adjusted EBITDA	792,848	1,091,190	994,509	1,373,035

Adjusted EBITDA represents earnings before interest, taxes, depreciation, amortization, foreign exchange gain (loss) and other revenues (expenses) as historically calculated by the Corporation.

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