I tested a simple guest as created with uvt-kvm:
$ uvt-kvm create --memory 2048 --cpu 4 --password=ubuntu 
paelzer-yakkety-test-libvirt release=yakkety arch=ppc64el label=daily
plus the two lines:
  <seclabel type='dynamic' model='apparmor' relabel='yes'/>
  <seclabel type='dynamic' model='dac' relabel='yes'/>

That works on:
Xenial: ok
Yakkety: ok

I did the same on ppc64el, but only had a Xenial host available there.
Yet this worked just fine as well.

Quoting the report: "Linux ltc-test-ci1 4.4.0-9136-generic #55-Ubuntu SMP Fri 
Aug 26 05:56:24"
Since that seems to be a pre-release yakkety, could I ask you to retest with at 
least the released levels and report the versions of qemu&libvirt involved for 
you (dpkg -l '*qemu*' '*libvirt*')?

** Changed in: libvirt (Ubuntu)
       Status: New => Incomplete

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  VM fails to start with dac security driver added

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