The enduring challenge of resource scarcity, particularly within emerging economies, presents a paradoxical environment where constraints paradoxically become fertile ground for innovation rather than serving solely as prohibitive barriers. This paper addresses the critical research problem of understanding the mechanisms through which systemic resource limitations within the specific metropolitan context of Cape Town, South Africa, drive creative problem solving among Small and Medium Enterprises (SMEs). Cape Town's unique history of resource crises, notably the persistent threat of energy load-shedding and the acute awareness generated by the "Day Zero" water crisis, provides a distinctive laboratory for observing entrepreneurship under duress. Theoretically, this study utilizes the framework of Frugal Innovation (FI), conceptualized not merely as cost reduction, but as a deliberate strategic response leveraging bricolage to develop sustainable solutions tailored to localized resource ceilings (Radjou and Prabhu, 2015). The proposed methodology is a series of in depth qualitative case studies focusing on between eight and twelve SMEs operating in highly constrained sectors across the Cape Peninsula, employing semi structured interviews with founders to capture nuanced decision making processes and experiential knowledge (Yin, 2018). Expected key findings suggest that scarcity compels SMEs toward systemic re-purposing of waste streams and obsolete industrial assets, resulting in entirely new business models rather than incremental product improvements. Furthermore, creative problem solving is anticipated to be highly reliant on community based design and the leveraging of informal social networks to share vital infrastructure access and technical expertise, thereby compensating for formal institutional failures (Baker and Nelson, 2005). These resourcefulness strategies move beyond simple survival tactics to establish robust, locally appropriate competitive advantages, a finding that will significantly contribute to the literature on innovation in the Global South (Tshuma, 2020). The main conclusion underscores the urgent need for policy interventions that shift from viewing resource scarcity as a solely negative externality to one that actively recognizes and supports the inherent ingenuity it stimulates. Recommendations focus on creating innovation support ecosystems that facilitate knowledge transfer from scarcity hardened SMEs to the broader economy, thereby fostering economic resilience in other African urban centers facing similar infrastructural deficiencies (World Bank Group, 2021). The paper establishes that the necessity imposed by resource constriction compels a higher order of creative problem solving that is economically, socially, and ecologically superior to innovation born of affluence (Mullainathan and Shafir, 2013).