Comment # 1 on bug 1204860 from Johannes Segitz

Thanks for the report. 

1199520 is specific to transactional systems, so it's likely something
different. To me it sounds like you installed SELinux manually, but I can't
quite follow it (e.g. selinux-targeted-setup doesn't exist).

Please give this a try:
zypper in selinux-policy-targeted restorecond selinux-policy-devel
policycoreutils setools-console policycoreutils-devel
policycoreutils-python-utils
sed -i -e 's/SELINUXTYPE=minimum/SELINUXTYPE=targeted/' /etc/selinux/config
sed -i -e 's/SELINUX=disabled/SELINUX=permissive/' /etc/selinux/config
if ! egrep 'GRUB_CMDLINE_LINUX_DEFAULT.*security=selinux selinux=1'
/etc/default/grub >/dev/null; then
        sed -i -E 's/(GRUB_CMDLINE_LINUX_DEFAULT=.*)"/\1 security=selinux
selinux=1"/' /etc/default/grub
fi
update-bootloader --refresh

reboot the system and check if it looks properly labeled. If it does you can
change it to enforcing with:

sed -i -e 's/SELINUX=permissive/SELINUX=enforcing/' /etc/selinux/config

and reboot