Hi Roan van Heerden,
Welcome to Microsoft Q&A forum and thanks for using Azure services.
As I understand, you are getting error "ERROR: permission denied to create role" when creating user in Azure Database for PostgreSQL.
Could you please SET ROLE
before using the create role privilege and see if this helps in your case.
Connect to the user airbp_location_master and issue below command:
SET ROLE group1; CREATE ROLE newuser;
Refer doc. Here is a stackoverflow thread which might also help: Logged in as postgres but getting the error createuser: creation of new role failed: ERROR: must be superuser to create superusers
Hope this helps. If not, please let us know so that we can further investigate.
Thank you.